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Banks, Financial

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Categorized | Banks, Financial

Citic to expand in Asia as rivals pull back

Posted on September 29, 2016

The China International Trust and Investment Corp. (CITIC) logo is seen on television monitors at a news conference announcing an initial public offering for China CITIC Bank Corp. Ltd., on Sunday, April 14, 2007, in Hong Kong, China. Photographer: Nelson Ching/Bloomberg News©Bloomberg

Hong Kong-based China Citic Bank International is preparing to launch an aggressive expansion of its investment banking operations at a time when global investment banks are pulling back from the region.

The bank plans to build up a merger and acquisition advisory team and an equity capital markets business in Hong Kong, people close to the matter said, following its work on ChemChina’s $44bn acquisition of Swiss agribusiness Syngenta in which the Chinese bank was the lead arranger on a $12.7bn syndicated loan.

    The move from Citic International comes during a slowdown in global markets that has pushed US and European investment banks to cut back on dealmaking positions in Asia.

    Goldman Sachs is in the process of axing up to 30 per cent of its investment bankers in Asia as pressure from shareholders increases for it to improve returns. In the coming months, Goldman could lay off as many as 90 investment bankers across the region, primarily in Hong Kong and Singapore, people familiar with the bank’s plans have said.

    Senior staff at Citic International were notified in a meeting this week of the plan to transition away from commercial banking and towards becoming a full-service investment bank.

    The changes include gaining several new financial licences in Hong Kong such as those for dealing in securities, publishing research on securities, corporate finance advising and asset management.

    The strategy for the bank, which is an offshore subsidiary of Beijing-based Citic Bank, will seek to “reduce its reliance on net interest income from its commercial banking businesses while boosting its fee income from investment banking”, a person close to the matter said. Citic also runs one of China’s largest securities brokers, Citic Securities.

    The bank did not respond to requests for comment on the matter.

    Along with Goldman Sachs, several other global investment banks have also been axing staff as the market outlook darkens across in the region. Global initial public offering volume has hit its lowest since 2009.

    Chinese banks have strengthened their positions in some investment banking businesses in Asia, such as syndicated lending and debt capital markets, but have struggled to gain a foothold in other areas, such as M&A advisory.

    Chinese banks took the top five spots as lead arrangers in syndicated lending in Asia excluding Japan in the year-to-date, according to Dealogic. The same banks have also risen to the top of the league tables for debt capital markets, mainly due to a surge in the onshore market, which is highly restricted for global banks.

    Outbound Chinese M&A has hit record levels, with companies doing more than $140bn in deals so far this year. Citic International, along with its parent, were lead arrangers for a syndicated loan for part of the $44bn ChemChina buyout of Syngenta in February.