Credit Suisse aims for 100% of securities venture in China growth plan
Credit Suisse (CSGN.S) wants to raise its China securities joint venture stake to 100% and increase its market share after getting the regulatory green light to take a majority holding, the head of its Asia business said.
Switzerland’s second-largest bank is also looking to hire more staff and invest in China, the world’s second-biggest economy, as its most significant business opportunity in the world, its APAC boss Helman Sitohang told Reuters.
China has gained in relevance for Credit Suisse and other international banks after Beijing fast-tracked the opening of its financial markets to foreigner investors.
After gaining 51% control of its securities joint venture in June and appointing Janice Hu as chairwoman, Credit Suisse aims to take on full ownership from Founder Securities as it seeks to build out its private and investment banking businesses.
Credit Suisse has placed great faith in Hu, a “veteran investment banker” who has been with it for almost two decades, to grow its business in China, where the timing of it gaining full ownership of the venture is in the hands of regulators.
The bank did not disclose the value of the joint venture.
While it does not break down its business by individual markets, Asia-Pacific accounted for roughly one-fifth of its overall pre-tax income in 2019, with Greater China its most important market in the region.
The bank ranks first in M&A revenues in Asia, excluding Japan, with a 12.4% market share for the first half of 2020, and first in investment banking revenues, with a 8.3% share, Dealogic says.
In Asia-Pacific Credit Suisse not only competes with larger Zurich rival UBS (UBSG.S), but also with other Swiss private banks including Geneva-based Pictet and listed lender Julius Baer (BAER.S) for wealth management business. Meanwhile in investment banking, Morgan Stanley (MS.N) and JPMorgan (JPM.N) are both major competitors, while Chinese investment bank CITIC Securities counts as a key rival in Asia.
China is producing the most new billionaires and Credit Suisse last month hired a new head of wealth management for onshore China, Jing Wang, from China Merchants Bank.
This followed two senior appointments this year for prime sales, and Credit Suisse is now looking to fill other key positions for its Chinese business over the next few months. “We will continue to invest across our platforms in China and closely integrate our onshore operations with our businesses in Hong Kong and across the region. There will be more hires, some of which we will announce shortly,” Sitohang said.
“It is clearly about tactical hiring: We want to capture opportunities. We know exactly where these are, where we see the potential to improve, and that is what we are focused on,” the 54-year-old Singaporean native said from his office in Singapore.
HONG KONG HUB
Hong Kong’s future as a global financial centre has been under scrutiny after the mainland Chinese government last month introduced tough new national security laws for the city.
Some analysts suggest investors could shift money to other offshore hubs, like Singapore, to cushion the impact of the growing political and economic uncertainty.
Sitohang reiterated Credit Suisse’s commitment to Hong Kong and said it had not registered any outflows.
“Hong Kong has been an important hub for Credit Suisse for decades … (and) there will be no changes to our presence,” Sitohang said, adding that it was an “integral part of our footprint for China overall”.
As well as its role in the largest equity capital markets deal in Hong Kong last year with Alibaba’s (BABA.N) secondary listing, Sitohang said Credit Suisse did another recently for Netease, (NTES.O) which was about $2.8 billion, as well as “a couple of large bond deals”.
Credit Suisse has increased the money it manages in the Asia-Pacific region by around a quarter over the last three years to 220 billion Swiss francs ($233 billion) at the end of 2019 before a drop to 197 billion francs in the first quarter due to the coronavirus crisis.
Although ties to Luckin Coffee — from whose chairman Credit Suisse is seeking to recoup a more than half-billion dollar loan along with five other banks — increased the Swiss bank’s first quarter provisioning for loan losses, Sitohang is not put off. Credit Suisse would stick by its strategy of acting as a “bank for entrepreneurs”, managing both the private wealth of rising business people as well as benefiting from their corporate activities through its investment bank, he said.