ICBC Leasing: Financing China’s growth

China’s ICBC Leasing closed its first business jet financing in June. It will finance 10 business jets next year.

Our guide

When outsiders think about China they think big numbers: 1.4 billion people; the fact that it is the world’s largest exporter; and its $9.712 trillion gross domestic product. With over 2.5 million corporate clients and 150 million customers, Industrial & Commercial Bank of China, the world’s largest bank by capitalisation and profit, fits the country well.

For the last three years ICBC Leasing has also been an increasingly active financier of commercial aircraft closing deals for all the largest Chinese airlines. It was also the first Chinese leasing company to finance aircraft for foreign airlines and its customers include British Airways and Virgin Atlantic.

ICBC Leasing is also keen to be one of the country’s most active financiers of business jets. In July this year it became the first domestic leasing company to finance a corporate aircraft for a Chinese customer when it closed a lease on a Gulfstream G450. It is set to close finance leases on two more business jets in 2010 and should finance about 10 more next year.

“We see huge market potential for business jets,” said Johnny Lau, global head of aviation finance at ICBC Leasing in Beijing. “First we see a lot of growth in the domestic market – our home market where the bank is very strong. Second there is the opportunity for us to move into the market at the right time when values have fallen after the financial crisis.”

As part of the world’s largest bank it benefits from referrals from both ICBC Private Bank and local branches but ICBC Leasing is also happy to talk to customers who are not yet part of the bank. All of the first deals have been for high net worth individuals but it is happy to finance corporates. Because Lau’s main business is financing airlines the bank will also consider business jet operators.

“We are prepared to be opportunistic,” said Lau. “We are happy to look at smaller deals and have closed deals on simulators in the past.”

As the most international Chinese leasing company ICBC Leasing will consider deals for lessees in other countries but its focus will be on customers in mainland China, Hong Kong, Macao and Taiwan. Domestic leasing companies have a big advantage financing mainland registered aircraft as they can pass on tax savings to their customers. While some Chinese owners may choose to register aircraft in Hong Kong, Macao or abroad there are significant disadvantages to operating a foreign-registered aircraft in China including longer flight planning times and double landing fees. “With ICBC’s relationships we aim to be one of the leading finance providers for Chinese customers,” said Lau. “We will be very competitive.”