(Yicai Global) April 3 -- The latest banking crisis in the United States and Europe will not affect Bank of Communications’ plans to go international, according to an executive at the Chinese lender.

The impact on the Shanghai-based bank of two US bank failures and the rescue of Credit Suisse is “very small and will not affect our internationalization process,” Tu Hong, general manager of Bosom’s financial institution department, told Yicai Global.

Bosom has 23 overseas branches in 18 countries and regions, and they had total assets of CNY1.3 trillion (USD190 billion) at the end of last year, up 6.4 percent annually and accounting for 9.7 percent of its total. The branches made up 5.6 percent of the bank’s total net profit.

“Silicon Valley Bank and Signature Bank experienced risks mainly because of a serious mismatch between the maturity of assets and liabilities,” said Tu, who is also president of Bocom’s Shanghai branch. “Their customers are too concentrated on high-tech firms, and their main business shifted from loans to securities financing, causing risks.”

But as the overall US banking sector is healthier than in 2008 thanks to improved capital adequacy and leverage ratios, there are no systemic risks in the US financial system, Tu noted.

“Credit Suisse has some business with Chinese banks, but just a few,” Tu said, adding that “Bank of Communications does not hold any additional tier one bonds that have been written down, so the overall judgment is that the risk events of European and US banks pose very little threat to Chinese lenders.”

Tu said the fall of Credit Suisse was mainly due to poor management, its business development being divorced from its main business, and it directed too many resources to investment banking, which, once it reported huge losses, damaged the lender’s balance sheet.

Moreover, Credit Suisse’s risk management is out of control, and internal management is chaotic, Tu said, noting that this should also serve as a wake-up call for Chinese banks.

Credit Suisse has integrated the investment and commercial banking models and combined them with its wealth management business, Liu Jun, Bocom president, said on the Chinese lender’s annual earnings conference call on March 30.

Credit Suisse’s mistake was to not know its customers, such as family office Archegos Capital Management and specialist finance firm Greensill Capital, two of its biggest investment losses, Liu added, noting that the basic conditions of the pair was average, but their financial skills made for a gratifying financial report and eventually led to significant losses.

Bocom had a net profit of CNY92.1 billion (USD13.4 billion) in 2022, up 5.2 percent from the year before, according to its latest earnings report.

Editor: Futura Costaglione