JPMorgan Chase & Co. (JPM), the biggest U.S. bank, increased the capital of its China unit by 2.5 billion yuan ($394 million) to meet rising demand for financial services in the world’s fastest-growing major economy.
The second infusion since the local subsidiary was incorporated in 2007 will bring its capital to 6.5 billion yuan, the New York-based lender said in an e-mailed statement today. The U.S. bank also received approval from the China Banking Regulatory Commission to open a branch in Suzhou.
JPMorgan joins Australia & New Zealand Banking Group Ltd. (ANZ) and DBS Group Holdings Ltd. (DBS) in adding to investments in China, seeking a bigger share of the world’s third-biggest banking market, where local currency loans have grown by an average 22 percent a year since 2008. Foreign banks may lend a maximum of 10 percent of their net capital to a single borrower, which limited their participation in the three-year lending boom.
“JPMorgan now sees a good opportunity to expand in China, given that there’s a lot of demand for all kinds of financial services,” Victoria Mio, a Hong Kong-based portfolio manager at Robeco Hong Kong Ltd., whose parent firm oversees about $222 billion in assets globally as of March 31, said by telephone. “There’s still growth in China, versus other parts of the world where there’s contraction or slower growth.”
With 114 trillion yuan of assets at the end of last year, China’s banking system is larger than the combined size of the 30 other emerging markets tracked by Fitch Ratings, and smaller than only the U.S. and Japan. About 45 percent of the nation’s 55 trillion yuan of outstanding loans were doled out in the past three years as the government spurred lending during the global financial crisis to resuscitate the economy.
Foreign banks more than doubled their combined profit from China to 16.7 billion yuan last year, according to the banking regulator. JPMorgan’s China unit earned 297.3 million yuan in 2011, compared with 70.4 million yuan a year earlier, according to its annual report.
ANZ Bank said this month it plans to invest $300 million in its China unit. DBS, Southeast Asia’s largest bank, announced in April it would inject 2.3 billion yuan into its Chinese subsidiary, adding to a 4 billion-yuan initial investment five years ago.
“The additional capital will better position the bank in the evolving regulatory environment and cement our commitment to clients in China,” Shao Zili, chairman and chief executive officer of JPMorgan China, said in the statement. “The capital will be used to expand the bank’s branch network, develop products, increase corporate lending and recruit employees.”
Ties Since 1911
The U.S. bank’s ties to China go back to 1911, when it led a syndicate in managing a railway company’s $7.5 million bond sale. In 1921, Equitable Eastern Banking Corp., one of JPMorgan’s predecessor firms, opened a Shanghai branch, according to the lender’s website.
JPMorgan has branches in Beijing, Shanghai, Tianjin, Guangzhou, Chengdu and Harbin. The company also offers investment banking services in China through a joint venture with First Capital Securities Co.
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