Citi applies to re-enter China investment banking market

Citigroup has applied for a licence to launch a wholly owned investment bank in China, three years after it exited the securities market in the world’s second-largest economy, according to a person with direct knowledge of the matter.

The Wall Street bank sold its stake in Citi Orient Securities in 2019, seven years after it established the joint venture. The move paved the way for Citi to set up a new, majority-owned business that could provide investment banking services such as debt and equity underwriting in mainland China, but put its progress in the market behind rival banks that have since increased control over their onshore joint ventures.

Citi said: “We continue to assess opportunities that will support our global and local clients’ onshore business.”

Beijing allowed foreign banks to own 51 per cent of their onshore Chinese securities joint ventures for the first time in 2017. Last year it announced that global banks could take full control of the businesses. JPMorgan and Goldman Sachs have since been approved by Chinese regulators to own 100 per cent of their onshore securities joint ventures.

Citi will be the eighth global bank that can provide investment banking services onshore in China if it wins approval to re-enter the market.

However, its rivals have failed to make much money through their own entities in the country. Just three — Goldman, UBS and Deutsche Bank — have been profitable in the past three years. The businesses controlled by JPMorgan, Morgan Stanley, Credit Suisse and HSBC have all reported overall losses during that period.

The biggest global investment banks had long sought the lifting of ownership restrictions on their onshore operations. Many have since announced plans to expand rapidly, in some cases aiming to double headcount and revenue.

China’s crackdown on overseas listings for its largest companies on data security concerns, following the calamitous US listing of ride-hailing app Didi in June, has forced global banks to put greater priority on expanding their mainland underwriting businesses.

Didi announced on Friday it would de-list from the New York Stock Exchange and instead aim to list in Hong Kong, in a growing sign of China’s control over its largest companies’ international strategies.

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