China’s Industrial Bank Said to Plan Purchase of BrokerBloomberg News
China’s Industrial Bank Co. plans to acquire brokerage Huafu Securities Co., people familiar with the matter said, as the securities regulator considers allowing lenders into the industry.
Industrial Bank has submitted its proposal to the State Council, the people said, asking not to be identified as they aren’t authorized to speak publicly. Huafu’s Communist Party committee has moved its office into the lender’s headquarters in Fuzhou city in Fujian province, two of the people added.
The plan underscores the potential for more competition for brokers, a prospect which drove down the shares of firms including Citic Securities Co. on Monday. China’s securities regulator said Friday that it was studying a proposal to let banks apply for brokerage licences, without giving any timetable for a decision.
“Brokerages will come under heavy pressure if banks are allowed to enter this area,” said Luo Yi, an analyst at Huatai Securities Co. in Shenzhen. “It will lead to cut-throat competition as banks control most of the financial resources.”
Industrial Bank jumped 9.8 percent in Shanghai as of 2:16 p.m. local time, heading for the biggest gain since September 2013.
After surging last year as the stock market boomed, China’s brokerages have pared gains in 2015 as share trading volumes moderate. Citic, the largest Chinese brokerage by market value, fell as much as 4.7 percent in Shanghai on Monday.
Bank of China Ltd. is the only Chinese bank that owns a domestic securities firm, through its Hong Kong-based brokerage unit. BOC International (China) Ltd. was established in 2002.
Industrial Bank, the nation’s ninth-largest lender, has a market value of about $45 billion, more than Standard Chartered Plc, while Huafu Securities is a securities firm controlled by the Fujian government.
Industrial Bank and Bank of Communications Co. would probably be among the first banks to take advantage of any opening up of the brokerage industry, China International Capital Corp. said in a report. At the same time, such a move is unlikely this year, with the government set to first allow banks to move into areas such as investment banking, CICC said.
Chinese brokerages accounted for 0.8 percent of China’s 192.9 trillion yuan ($30.8 trillion) in financial assets at the end of 2013, compared with lenders’ 78 percent share, according to central bank data.
Industrial Bank’s press officer couldn’t immediately be contacted for comment; Huafu didn’t immediately reply to an e-mail seeking comment; and the State Council Information Office didn’t immediately respond to a fax seeking comment.
— With assistance by Jun Luo, Heng Xie, Steven Yang, and Aipeng Soo