Truck maker China National Heavy Duty Truck Group Co Ltd (CNHTC) has branched out into the country's banking industry by buying around 20 per cent of a city commercial bank.

 

CNHTC and Weihai City Commercial Bank (WHCCB) signed a contract on Monday.

 

Under the terms of the deal, CNHTC will make a 100 million yuan (US$12.3 million) capital injection into the bank to become its second-biggest shareholder.

 

CNHTC is hoping to lower its costs and wants better financial services from the deal. The truck giant is also aiming at decentralizing risks by having a diversified business portfolio.

 

"Buying into the banking industry is a worldwide trend. CNHTC also wants to set foot in this market," said Jiang Guixiang, spokesman for CNHTC. WHCCB is the first financial institution CNHTC has bought into, according to Jiang.

 

The deal will also help WHCCB secure a big client by expanding its financial service to CNHTC's truck business.

 

WHCCB is located in the east of Shandong Province and is the first city bank to be held by a non-local State-owned enterprise. Total bank assets reached 13.9 billion yuan (US$1.71 billion) in 2005. The bank has 10.6 billion yuan (US$1.3 billion) in deposits and made a 153 million yuan (US$18.9 million) profit last year.

 

CNHTC has also reached a strategic cooperation deal with the bank's biggest shareholder, Shandong Provincial Expressway Group Co Ltd (Shandong Expressway).

 

The latter will co-operate with CNHTC in building truck-repair centres. Shandong Expressway also promised to buy more trucks from CNHTC.

 

CNHTC bought into WHCCB partly because the truck firm wanted to establish this cooperative relationship with Shandong Expressway, Jiang said. Shandong Expressway is CNHTC's biggest client, buying more than half of its annual production.

 

CNHTC, located in Shandong's capital city Jinan, is one of the country's major heavy truck manufacturers. Despite the shrinking domestic heavy-duty truck market in 2005,

 

CNHTC produced 45,000 vehicles last year, occupying 18 per cent of the market, 6 per cent up from 2004.

 

The company made a 1.9 billion yuan (US$234 million) gross profit in 2005, a 500 million yuan (US$61.7 million) increase from 2004.

 

The firm expects to produce 60,000 trucks, each having a carrying capacity of above 15 tons, this year.

 

According to Jiang, CNHTC has no plans to buy into another bank in the near future.

 

(China Daily January 11, 2006)