HSBC lifts stake in China securities venture to 90%

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HSBC Holdings PLC boosted its holding in its Chinese securities joint venture to 90% from 51%, the latest in a series of moves by global banks to take greater ownership of investment-banking operations in mainland China.

The increased holding will give the British banking giant a bigger share in the financial performance of the Shenzhen-based subsidiary, which underwrites securities offerings, publishes research, advises on mergers and helps clients trade domestic stocks and bonds.

The London-based lender said Wednesday it had bought the 39% stake in HSBC Qianhai Securities Ltd. from its partner, state-owned Qianhai Financial Holdings Co. The latter has retained a 10% stake in the business. HSBC didn’t say how much it paid.

HSBC has moved to sharpen its focus on Asia in recent years, saying in 2021 that it would pour $6 billion of investment into the region over five years. China is an integral part of that shift, including a plan to hire 3,000 onshore wealth planners.

Asia is already HSBC’s main profit center, generating $12.2 billion of profit before tax last year, or nearly 65% of the bank’s total. And Hong Kong and mainland China are two of its most lucrative markets, alongside the U.K., producing pretax profits of $5.9 billion and $3.3 billion respectively.

“Our increasing stake in HSBC Qianhai Securities reflects our commitment in developing China’s rapidly growing capital markets,” said David Liao, co-chief executive of HSBC Asia-Pacific, in a statement.

An HSBC spokeswoman said the increased stake would give the bank more board seats and greater flexibility in managing the unit, and would help justify it making more investment in the business.

HSBC Qianhai Securities started operating in late 2017, and was the first majority foreign-owned securities joint venture in China. At the time, HSBC was able to take advantage of an economic-partnership deal between Hong Kong and mainland China to get ahead of international rivals in securing that approval.

Since then, Beijing has opened the doors more fully to foreign financial firms, including Wall Street banks and big U.S. money managers, thanks partly to a trade deal with Washington. Goldman Sachs Group Inc. and JPMorgan Chase & Co. were both cleared last year to take full control of Chinese securities units.

The most-recent annual report on HSBC Qianhai Securities’ website showed the unit made a loss of 136 million yuan, equivalent to $21.4 million, in 2020, on operating income of 260 million yuan. It ended that year with 1.45 billion yuan in assets and 202 staff.

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