Bank of America Corp. plans to seek approval from China to expand its operations in the fast-growing country, where the largest U.S. bank in assets lags many of its rivals, according to people familiar with the situation.
The Charlotte, N.C., bank entered China in 2004 with a branch in Shanghai and has since received approval to handle limited forms of lending and investment banking. Bank of America also holds a minority stake in China Construction Bank Corp., the second-largest bank in China.
Bank of America executives are discussing the need to incorporate locally in China, these people said. It isn't clear how much capital the bank is seeking to inject into the unit, although Beijing requires a minimum of one billion yuan ($146.59 million) in registered capital. Nor is it clear how the bank would use its new powers if approved, though people familiar with the matter said Bank of America more likely would pursue commercial business, rather than the retail banking that is one of its strengths in the U.S.
According to bankers in China, winning permission to pursue new business often is linked to setting up a locally incorporated unit.
"We want to expand our business but have no update on specific licenses," a Bank of America spokesman said.
The move comes as the giant bank is trying to broaden its business around the world under new Chief Executive Brian Moynihan. In China, Bank of America has moved less aggressively than some competitors in its pursuit of certain markets.
China is an alluring market because of its massive deposit base. But some banks have been reluctant to incorporate there, doubting that they can compete for retail customers against rivals who entered China first, let alone the vast networks of China's state-owned banks.
The first foreign banks to get local Chinese licenses were Citigroup Inc., HSBC Holdings PLC's Hongkong & Shanghai Banking Corp., Standard Chartered Bank PLC and Hong Kong's Bank of East Asia Ltd. They use their licenses to do business with retail customers using local currency. Citigroup, for example, takes deposits from Chinese customers under a wholly owned subsidiary called Citibank (China) Co.
Goldman Sachs Group Inc., UBS AG, Credit Suisse Group and Deutsche Bank AG have regulatory approval to underwrite stock and bond sales in China using joint ventures.
JPMorgan Chase & Co. is close to forming a joint venture with a small Chinese securities firm that would allow the New York company to expand into investment-banking services such as underwriting initial public offerings. Approval for JPMorgan to act as a primary dealer for Chinese government bonds came after the bank incorporated locally in China.
Local incorporation "helps show that we want to be a local player, that we want to work more closely with the local regulator," said Fang Fang, JPMorgan's top executive in China.
It isn't clear how Bank of America's push to get bigger in China on its own would affect its cooperation with China Construction Bank.
Under a 2005 deal, Bank of America took a stake in the Chinese bank in return for advice and assistance on certain matters and planned joint ventures in equipment leasing and credit cards. Bank of America also agreed not to compete with China Construction Bank in retail banking. A spokesman for China Construction Bank said that the cooperation agreement between the two banks doesn't preclude Bank of America from locally incorporating or from offering services in any other areas other than retail banking.
Bank of America currently has offices in Shanghai, Beijing and Guangzhou that focus on commercial-banking services.
Last spring, Bank of America sold a third of its 16.7% stake in the Chinese lender amid regulatory demands for new capital. The U.S. bank can't do anything with its remaining shares until August 2011.
Bank of America executive Gregory Curl, a member of China Construction Bank's board, has spent substantial time in China during the past several months, said a person familiar with the situation. Mr. Curl is retiring from the U.S. bank at the end of this month. Some Chinese officials have been nervous about Mr. Curl's exit because they don't know Mr. Moynihan as well, this person said.
Bank of America Chairman Walter Massey recently returned from a trip to China, where he spent time with Mr. Curl.