UBS AG Becomes First Foreign Bank Allowed Majority Stakes In China

The logo of Swiss bank UBS
China granted UBS AG the majority control of its local securities business, making the Swiss bank the first foreign financial firm to allowed greater stake in its operations inside the Asian powerhouse.
(Photo: REUTERS/Arnd Wiegmann)

UBS AG becomes the first foreign bank to received approval from the China Securities Regulatory Commission for a larger shareholding in its securities joint venture in China, the bank announced on Nov. 30.

From 24.99 percent stake, the Swiss multinational investment bank now controls 51 percent of the UBS Securities Co. Ltd. The bank said it would be acquiring stakes from China Guodian Capital Holdings and COFCO their 12.01 percent and 14 percent stakes in UBS Securities.

As soon as the transaction is completed, UBS AG will own 51 percent as mentioned, Beijing Guoxiang Property management Co. Ltd will own 33 percent, Guangdong Provincial Communication Group Co. Ltd. will own 14.01 percent, and finally, China Guodian Capital Holdings will own 1.99 percent.

China had previously limited foreign ownership of their local securities businesses to merely 49 percent. The policy had always been the subject of complaints among international firms. In April this year, China addressed the complaints by allowing foreign financial firms to finally own 51 percent of their respective JVs. The government has also planned to eventually allow them to gain full control in the coming years.

When China relaxed its policies regarding foreign ownership in April, UBS AG was the first foreign bank to apply for an increased stake. With this, the Swiss bank beat other financial institutions which include JP Morgan Chase, and Japan's Nomura Holdings. These two banks are still currently waiting for similar approval from the China Securities Regulatory Commission, AFP reported.

This week, however, two big European insurance firms received their approval for expansion in China. Allianz was given the green light to start its fully funded company while Axa was allowed full control of a joint venture, AFP stated in its report.

A greater stake in UBS Securities Co. Ltd. is the company's key strategy to grow the business in the Asian powerhouse, Sergio Ermotti, UBS group CEO, said in a statement. He added that further opening up of China's economy means bigger opportunities for UBS Ag's wealth management, investment bank, and asset management businesses. Ermotti highlighted that UBS has been at the forefront of foreign investment in China since its establishment in the Asian powerhouse in 1989.

Kathy Shih, president of UBS Asia Pacific, described the development as a "key milestone" in the Swiss bank's history.

Eugene Qian, president of UBS Securities, thanked the regulator and shareholders for giving the bank another "first." The president was optimistic that with the majority control, UBS AG could better serve its clients in China while also making a greater contribution to the growth of the UBS Group as a whole.

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