For JPMorgan, the approval to have a majority-owned securities firm in China is just the beginning of the US bank's game plan in the world's second largest economy.
The New York-headquartered bank, with assets of US$2.6 trillion and operations worldwide, says it plans to take full ownership of its mainland operations from securities, asset management to futures options next year when it celebrates its 100th anniversary in China.
As part of a four-year investment plan, the full ownership will allow the bank to confront international peers and mainland banking giants.
Mark Leung, CEO for China at JPMorgan, said full ownership was important to deliver a seamless experience for Chinese clients, adding that he hopes to achieve the target by next year as it marks JPMorgan's centenary in China.
JPMorgan has been offering its services to clients in China since 1921. Photo: Nora Tam alt=JPMorgan has been offering its services to clients in China since 1921. Photo: Nora Tam
"Once these entities are built, they provide the foundation for us to build a very cohesive and competitive offering," Leung told the South China Morning Post in an interview in Hong Kong.
In December, JPMorgan received approval in China for a majority-owned securities licence, enabling the company to build and provide onshore products and capabilities for clients in equity research, investment banking, equity capital markets, debt capital markets as well as mergers and acquisitions. It was the third foreign bank after UBS and Nomura to receive the nod.
The bank can also undertake securities trading, risk management positioning and agency execution of securities.
With a registered capital of 800 million yuan (US$114.6 million), Shanghai-based JPMorgan Securities (China) is 51 per cent controlled by its subsidiary JPMorgan International Finance. Chinese investors in the venture include Shanghai Waigaoqiao Free Trade Zone Group, Shenzhen Mailande Equity Investment Management and three others.
The bank is said to be preparing the application to get the full ownership licence as the country opens its US$45 trillion financial industry to competition from overseas players.
"It's a big time for us to have the necessary approvals for our majority owned securities licence " with the possibility of it moving towards full ownership," said Leung, who took charge in May 2018.
"My previous background was running our global equities and prime services businesses. I can't wait to see a full suite of our global product capabilities on the ground."
Leung has been with JPMorgan for 21 years, starting his career in rates derivatives trading and has held trading roles in emerging markets and equity derivatives. Before taking up the new post, he co-headed the bank's global equities and prime services division.
In October, China's securities regulator announced a timetable for scrapping foreign ownership limits in futures, securities and mutual fund companies. Limits on overseas ownership of futures companies were scrapped on January 1 this year. Ownership caps for mutual fund companies will go on April 1 and those of securities firms will be removed on December 1.
"These businesses are actually the same building blocks of our corporate and investment bank business globally. As we build our business onshore, we want to provide clients access to our onshore entities and our offshore products," said Leung.
He said many of its securities products are expected to be up and running over the next couple of months. The agency equities platform is expected to be ready early second quarter as we work with [mainland] exchanges, he said.
Starting its business in China since 1921, JPMorgan offers services such as, corporate and investment banking, commercial banking, treasury services and asset management.
JPMorgan also has a fully owned locally incorporated bank, providing companies and financial institutions services such as, wholesale payments, cash management, trade finance and fixed income products.
By the end of this month, JPMorgan will add Chinese government bonds to its widely tracked emerging market local currency bond index. The bank has estimated the inclusion can generate about US$250 billion to US$300 billion in flows into the world's third largest bond market.
In terms of staffing, Leung said its new securities business has over 130 people, all hired in the past 15 months.
"We will continue to add. We are in the second year of a four-year investment plan, which means that we will be doubling our resources quite rapidly, including technology, in people, everything. The bank still expects to run a circa 15 per cent rate [a year] of growth in terms of the overall franchise headcount."
On the impact of the coronavirus disease in China, now named as Covid-19, Leung said the bank was carefully controlling the need for business travel, adding that in the short term, many mainland employees were working from home.
The company's first-ever global virtual conference this week is a case in point. The Shenzhen Equities Conference saw some 180 meetings between the bank and its clients split over two days.
"Because we have the technology that allows us to do this, this will be the norm in the short term," Leung said.
