Citigroup to form China investment bank venture
Citigroup Inc and Central China Securities will soon apply to Chinese regulators to set up an investment banking joint venture, two sources who were briefed on the situation told Reuters on Sunday.
By Agencies |
SHANGHAI: Citigroup Inc and Central China Securities will soon apply to Chinese regulators to set up an investment banking joint venture, two sources who were briefed on the situation told Reuters on Sunday.
The new company would be Citigroup's first investment banking venture in China. It already helps Chinese companies list in Hong Kong, but involvement in the country's domestic investment banking business would be an important expansion.
The plan could also indicate that the large U.S. bank remains committed to growth in large and attractive emerging markets such as China despite the damage it has suffered in the U.S. subprime loan crisis. Earlier this month, Citigroup announced 4,200 job cuts after it posted a record $9.83 billion quaterly loss.
Under its deal with Central China Securities, a medium-sized brokerage based in the central province of Henan, Citigroup would apply for permission to own the maximum allowable 33 percent stake in the venture, said the sources, who declined to be identified as they were not authorized to speak to media. Citigroup spokeswoman Shannon Bell had "no comment" about the deal.
Central China Securities could not be reached for comment. An official announcement of the deal is expected to be made this week, the sources said. Citigroup has been looking for a Chinese brokerage partner to set up an investment banking venture for years.
The deal with Central China Securities comes after failed efforts to make similar arrangements with Chinese firms including Xiangcai Securities and Founder Securities, the sources said. "Citigroup gets its China partner for investment banking at last ... after years of searching and waiting," said one source.
"The deal has strong support from the local Henan government, so the central government would be unlikely to turn it down, as Beijing also wants to boost Henan's financial sector growth." Central China Securities has more than 500,000 securities business clients and about 40 offices in major cities including Beijing and Shanghai, where its investment banking business is based, according to data from the company.
Some foreign banks entered the Chinese investment banking market long ago. Goldman Sachs Group Inc bought 33 percent of a venture with Gao Hua Securities in 2004, while UBS gained a foothold in 2005 through the purchase of part of Beijing Securities. A two-year regulatory ban on new foreign-invested ventures then ensued as China restructured its brokerage sector, but Beijing announced this month details of rules under which it will resume approving ventures. Several foreign banks are therefore scrambling to establish ventures.
Credit Suisse said this month it had signed a pact with Founder Securities, and Reuters reported in late December that Morgan Stanley had signed a deal with Fortune Securities. Citigroup is already active in China's commercial and retail banking sectors, where it has started offering yuan retail banking services and has a minority stake in Shanghai Pudong Development Bank, as well as de facto management control of Guangdong Development Bank.
Citigroup is expected to finish its aquisition of Japan's third-largest brokerage, Nikko Cordial Corp, by buying the remaining 32 percent of Nikko it did not own for $4.6 billion in stock.
The new company would be Citigroup's first investment banking venture in China. It already helps Chinese companies list in Hong Kong, but involvement in the country's domestic investment banking business would be an important expansion.
The plan could also indicate that the large U.S. bank remains committed to growth in large and attractive emerging markets such as China despite the damage it has suffered in the U.S. subprime loan crisis. Earlier this month, Citigroup announced 4,200 job cuts after it posted a record $9.83 billion quaterly loss.
Under its deal with Central China Securities, a medium-sized brokerage based in the central province of Henan, Citigroup would apply for permission to own the maximum allowable 33 percent stake in the venture, said the sources, who declined to be identified as they were not authorized to speak to media. Citigroup spokeswoman Shannon Bell had "no comment" about the deal.
Central China Securities could not be reached for comment. An official announcement of the deal is expected to be made this week, the sources said. Citigroup has been looking for a Chinese brokerage partner to set up an investment banking venture for years.
The deal with Central China Securities comes after failed efforts to make similar arrangements with Chinese firms including Xiangcai Securities and Founder Securities, the sources said. "Citigroup gets its China partner for investment banking at last ... after years of searching and waiting," said one source.
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"The deal has strong support from the local Henan government, so the central government would be unlikely to turn it down, as Beijing also wants to boost Henan's financial sector growth." Central China Securities has more than 500,000 securities business clients and about 40 offices in major cities including Beijing and Shanghai, where its investment banking business is based, according to data from the company.
Some foreign banks entered the Chinese investment banking market long ago. Goldman Sachs Group Inc bought 33 percent of a venture with Gao Hua Securities in 2004, while UBS gained a foothold in 2005 through the purchase of part of Beijing Securities. A two-year regulatory ban on new foreign-invested ventures then ensued as China restructured its brokerage sector, but Beijing announced this month details of rules under which it will resume approving ventures. Several foreign banks are therefore scrambling to establish ventures.
Credit Suisse said this month it had signed a pact with Founder Securities, and Reuters reported in late December that Morgan Stanley had signed a deal with Fortune Securities. Citigroup is already active in China's commercial and retail banking sectors, where it has started offering yuan retail banking services and has a minority stake in Shanghai Pudong Development Bank, as well as de facto management control of Guangdong Development Bank.
Citigroup is expected to finish its aquisition of Japan's third-largest brokerage, Nikko Cordial Corp, by buying the remaining 32 percent of Nikko it did not own for $4.6 billion in stock.
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