JPMorgan in talks to sell out Chinese securities JV

JPMorgan Chase & Co is in talks to sell out of a Chinese securities joint venture (JV) with First Capital Securities in what would be the first departure by a top-tier global investment bank from China's securities segment.

Wall Street banks like JPMorgan hold only minority stakes in such ventures. The resulting lack of control and limited contribution to total revenue have brought banks frustration at a time when domestic competition has become acute.

Almost all leading investment banks, including Goldman Sachs Group, UBS Group, Morgan Stanley, Deutsche Bank and Credit Suisse Group have securities ventures with local firms.

Shenzhen-listed broker First Capital, in an exchange filing on Thursday, said it is in talks to buy JPMorgan's 33 per cent of JP Morgan First Capital Securities. It said no transaction has been finalised and that any purchase remains uncertain. JPMorgan confirmed the content of the filing.

"China is a key market for the firm globally and for many of our clients outside China. JP Morgan believes in the long term prospects of China and remains fully committed to our China franchise," the US bank said in an emailed statement.

Neither JPMorgan nor First Capital gave reasons for the move.

Some analysts said the US bank could return to China's securities market with a new partner as the outlook for onshore deals remains attractive.

Rival Morgan Stanley launched a securities joint venture with Huaxin Securities in 2011, a year after it sold its 34.3 per cent of China International Capital Corp (CICC), the country's top investment bank at the time.

"It has been a difficult ride (for foreign banks), but we really feel that it's at tipping point in terms of opportunities and the banks have just a lot left on the table," said Benjamin Quinlan, CEO of financial services consultancy Quinlan & Associates.

"There is no alternative avenue for foreign players to go in and China is sending a clear signal that it is liberalising and I do think they (foreign banks) will be able to get to a stage where they have effective management control of the entity." China's securities regulator approved the establishment of JPMorgan First Capital Securities at the end of 2010. The venture, headquartered in Beijing, offers services such as stock and bond underwriting and merger advisory.

Reuters