Merchants Bank buys fund stake
China Merchants Bank, the nation's seventh-largest lender, has received approval from the securities regulator to become the largest shareholder in China Merchants Fund Management amid its efforts to diversify into non-banking services.
The Shenzhen lender plans to buy a 33.4 per cent stake in the fund house held separately by China Power Finance, China Huaneng Finance, Cosco Finance and China Merchants Securities.
The deal still needs the approval of the state asset regulator.
The China Securities Regulatory Commission approval was considered to be the more difficult of the required government endorsements, since the agency has never allowed a bank to buy into an existing fund management company.
China Merchants, with more than 400 outlets nationwide, is among the second batch of mainland lenders to run fund houses. Industrial and Commercial Bank of China, Bank of Communications, China Construction Bank, three of the biggest lenders, have already founded fund management firms with foreign partners.
Others, including Agricultural Bank of China, Shanghai Pudong Development Bank and China Minsheng Banking Corp, are preparing to set up their own fund operations.
Sister company China Merchants Securities, formerly the fund firm's largest shareholder, and ING Asset Management of the Netherlands will hold each hold a 33.3 per cent stake in China Merchants Fund Management after the sale.
The firm, which oversaw almost 30 billion yuan at the end of the first quarter, reported a loss of more than 67 million yuan last year, from a gain of 37 million yuan according to the annual reports of China Merchants Securities, partly because of the loss in its money market fund.
The fund has shrunk from a peak of 27.5 billion yuan in 2005 to 3.6 billion yuan as of March this year.