ICBC (Asia), an overseas arm of the Industrial and Commercial Bank of China, announced yesterday that it would acquire the retail and commercial operations of Fortis Bank Asia (HK) for an undisclosed amount of cash and shares.

Fortis Bank Asia (HK) has 900 staff and 22 branches in Hong Kong. It is a subsidiary of the Fortis Group, one of the largest European financial conglomerates in terms of banking, insurance and asset management.

Under the non-binding memorandum of understanding signed by the banks, ICBC (Asia) will pay for the deal via a cash payment and an issue of new shares of up to 10 percent of ICBC (Asia)'s enlarged capital.

The Industrial and Commercial Bank of China will remain the controlling shareholder of ICBC (Asia), while Fortis will become a minority shareholder and will appoint one non-executive director to the ICBC (Asia) board.

Zhu Qi, chief executive and managing director of ICBC (Asia), said: "Our long-term goal has always been to be a major bank in Hong Kong. ... The acquisition will help strengthen our retail and banking business, enlarge our branch network and enhance our cross-selling capabilities."

He said the completion of the acquisition will boost the bank's total assets from HK$62 billion (US$7.95 billion) to about HK$90 billion (US$11.54 billion), more than double its existing network of 20 branches in Hong Kong, as well as increase its customer base by 80,000 to 90,000 people.

Meanwhile, the transaction will not only enable Fortis to hold up to 10 percent of ICBC (Asia)'s enlarged amount of shares but also give Fortis a way into the booming Chinese market.

Dennis Ziengs, chief executive of Fortis in Asia, said: "We see this as the start of a long and prosperous relationship with China's largest banking group - and a major step for Fortis' expansion into the China market."

Ziengs said Fortis would soon announce further investment in Asia - with a particular focus on China - in the coming six to 12 months. He added that Fortis will still keep its corporate banking operations in Hong Kong, but that it was possible for Fortis and ICBC (Asia) to form joint ventures in the future.

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