European banks that are undergoing broad-based restructuring to trim global operations and become more domestic-focused, are still looking for growth opportunities in China, particularly the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone ("Qianhai").
Earlier this month, HSBC Holdings plc’s HSBC plans to enter the country’s $4-trillion bond market through a joint venture (JV) with the Chinese government hit the markets. However, while HSBC’s proposed venture still awaits regulatory approval, its rival company Credit Suisse Group AG CS has attained business permit from China Securities Regulatory Commission to launch securities brokerage services in Qianhai, and will open an outlet by early next year.
The new business will enhance Credit Suisse’s existing Chinese operations, which include stock underwriting and bond offering. Notably, the company runs this business through Credit Suisse Founder Securities Limited, a Sino-Foreign JV with local Chinese player Founder Securities, and holds 33% stake in the same. Nonetheless, such services will be limited to the Qianhai zone.
The latest development is in line with Credit Suisse’s plan to strategically expand its Asia-Pacific operations. Last month, the company unveiled plans to double its client assets under management (“AUM”) as well as pre-tax income in the region by 2018.
Notably, the company recorded a 17% surge in core revenues and a 48% rise in pre-tax income from the Asia-Pacific region during the first nine months of 2015. Given the notable contribution and success of Credit Suisse’s Asia-Pacific business, we remain encouraged about its new securities brokerage business in China.
However, the company will likely face competition from The Goldman Sachs Group, Inc. GS and UBS Group AG UBS, which have been conducting brokerage business in the country over the past decade.
Credit Suisse currently carries a Zacks Rank #5 (Strong Sell).
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