Goldman Sachs

Barclays looks for securities partner

PUBLISHED : Tuesday, 08 May, 2012, 12:00am
UPDATED : Tuesday, 08 May, 2012, 12:00am

British bank Barclays is seeking a mainland partner to set up an investment banking venture that will take advantage of the fast growth of China's capital market where the likes of Goldman Sachs and UBS already have operations.

People familiar with the matter told the South China Morning Post that Barclays was considering more than a dozen Chinese securities firms with a view to a possible partnership, including Chongqing-based Southwest Securities.

Beijing is opening up the financial services industry to foreign investors, allowing them to take up to a 49 per cent stake in securities ventures on the mainland. The liberalisation was announced last week during the annual Sino-US Strategic and Economic Dialogue in Beijing.

In comparison with its major competitors, Barclays is considered a latecomer to the investment banking business on the mainland.

Although the British bank has a good relationship with the state-owned China Development Bank, which is a minority Barclays shareholder, that arrangement is more about investment opportunities in the global natural resources sector. Barclays is well known in the banking industry for its trading expertise in commodities.

'It is late but it's better than nothing,' said one person of the Barclays move who declined to be identified as he was not authorised to speak to the media.

On Monday, a Barclays spokesman told the Post the bank hopes to have a securities venture on the mainland at some point but declined to comment further.

A total of 13 foreign financial institutions have set up securities ventures on the mainland in the past decade. Goldman Sachs and UBS were considered early birds, while last year Wall Street banks including J.P. Morgan and Morgan Stanley won Beijing's approval to establish securities ventures .

Before last week's announcement about foreign ownership in mainland-based securities ventures, the maximum stake a foreign institution could hold in such a joint venture was 33 per cent, according to Chinese financial regulations.

The move to permit foreign stakes in securities ventured up to 49 per cent signals Beijing has become more relaxed about foreign shareholders having more control, or even de facto management control, of their joint ventures. That is seen as a way of improving the business expertise and management level of domestic securities firms.

Part of the reason Barclays was late in joining the industry was that it was keen to have a controlling stake in any joint venture, so it could have the right to appoint senior executives, said the people familiar with the matter.

Now, with the easing of the financial regulation, Barclays feel it can more easily win control of a joint venture on the mainland. 'In fact, a controlling stake doesn't necessarily mean 51 per cent. For example, if you have three shareholders in the venture and you own 49 per cent, you are the big boss,' said one of the people.

Global investment banks are allowed to underwrite domestically listed A-shares or bonds for big Chinese companies through their securities ventures.

Beijing has said it wants to boost trading volume in its main onshore capital and currency market in Shanghai in the next three years and to make Shanghai a leading global financial centre by 2020.

Additional reporting by May Chan