Bank of America Entering Chinese Credit Card Market

Bank of America Corporation and China Construction Bank today announced an agreement on a memorandum of understanding to jointly enter into a new credit card collaboration aimed at providing innovative card products for the rapidly growing Chinese market.

The two companies are planning a rapid roll-out of the collaboration to leverage Bank of America’s leading credit card expertise combined with China Construction Bank’s (CCB) market strength. The roll-out would be implemented in two stages:

In the first stage, CCB would create a stand-alone credit card unit, merging its current card operations into this new unit. CCB would also form an advisory committee to determine and develop the unit’s business structure. Bank of America would serve on this committee and provide advisory services on the unit’s development.

The second stage would involve converting the credit card unit into a Chinese-foreign credit card joint venture, registered in China. Bank of America would acquire 37 percent of the joint venture and would begin launching co-branded credit cards. At the time of the second stage, both companies would have board of director representation and be a part of the company’s senior management team. The second stage would occur after new joint venture regulations are enacted by the Chinese government and subsequent regulatory approvals are obtained.

"For Bank of America, this is a strategic collaboration in one of the fastest growing economies in the world," said Kenneth D. Lewis, Bank of America chairman and chief executive officer. "It allows us to deepen our alliance with CCB while also positioning Bank of America to participate in the market’s future growth once new regulations are enacted.

"Our goal is to help CCB better meet the increasing financial demands of its customers while increasing revenues for both of our companies," said Lewis.

Credit card volumes in China increased more than 70 percent in 2006 and rapid growth is anticipated for future years as credit cards become more available and accepted by both consumers and retail outlets.

"CCB’s credit card business is continuing to show strong growth momentum," said Guo Shuqing, CCB chairman. "We are well positioned as a leader in this initial stage of the country’s credit card market, creating an excellent foundation for our future development in this sector. Bank of America’s credit card business is at the top of its class worldwide, and can provide solid support for CCB to accomplish its strategic goal of developing its credit card business, and help enhance this core competence. "

Since launching in 2003, CCB’s credit card business has been developing rapidly. As part of the company’s overall strategy to become a world-class retail bank, CCB’s credit card business has seen a continuous increase in market share, product competitiveness, customer satisfaction and risk management.

The scale of the business has also risen rapidly, leading to improvements in quality and efficiency. The number of new cards issued, the retail sales volume and the overdraft balance in 2006 were nearly double those of the preceding year.

With a 20 percent market share, CCB is the second largest credit card issuer in China, issuing a total of 6.34 million credit cards, of which 3.22 million cards were issued in 2006. Total retail sales volume was RMB40.467 billion and the average purchase amount was RMB14,600, the highest among all Chinese competitors.

This is third customer program offered jointly by the two banks following the successful launch of their free ATM withdrawal and remittance services last year. In June 2005, Bank of America became a 9 percent shareholder of CCB and began providing advice and assistance to CCB in such areas as consumer banking, treasury services, governance and risk management designed to enhance the Chinese bank’s performance.