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Credit Suisse (CS) to Own 51% Stake in China Securities JV

Zacks Equity Research

As China opened its financial markets to foreign firms with the removal of restrictions on ownership effective Apr 1, Credit Suisse Group AG CS became the latest foreign bank to take the majority stake in its China securities joint venture (JV). The Swiss bank raised its shareholding in Credit Suisse Founder Securities (CSFS) to 51% from the existing 33.3%.

The development follows the opening up of the Chinese markets for foreign financial firms. China’s securities regulator — The China Securities Regulatory Commission (“CSRC”) — removed restrictions on foreign ownership in 2018. Markedly, it now allows foreign companies to take full control in securities JVs by buying out local partners or setting up their own money management and investment banks.

Credit Suisse’s investments in China will continue and Janice Hu would serve as the chairwoman of CSFS, driving the bank's onshore strategy in the country and executing the securities JV’s future business plans.

Notably, CSFS, formed in 2008, is a provider of various capital markets services to clients in the domestic China market, which includes sponsoring and underwriting A shares, foreign investment shares and government and corporate bonds, along with financial advisory services. Also, since October 2016, the venture has executed securities brokerage business in Shenzhen’s Qianhai free zone, and developed its trading and execution capabilities.

Remarkably, a correspondent banking relationship was established by Credit Suisse with the Bank of China in the 1950s. Thereafter, the China business was recognized by the Swiss Bank in private banking, equities, and investment banking and capital markets.

Among other ventures, Credit Suisse also set an asset management joint venture “ICBC Credit Suisse Asset Management” holding assets under management of 1.3 trillion yuan ($182 billion), as of December 2019, to explore the prosperous wealth-management market.

Shares of Credit Suisse have lost 31.2%, year to date, compared with the industry’s decline of 37.4%.

Currently, Credit Suisse carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other than Credit Suisse, several major global financial firms, like Goldman Sachs GS, JPMorgan JPM, Morgan Stanley MS and UBS Group, have won approvals for the same to increase stakes in their respective JVs in China. Since foreign companies are allowed to conduct business in the country without any restrictions, it will aid in geographical expansion and boost revenues.

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