May 13 (IFR) - Five of China's overseas-backed securities
joint ventures lost money in 2012, according to data released
over the weekend, underlining the challenge facing global banks
looking to gain a foothold in the country's capital markets.
Morgan Stanley's joint venture was the worst
performer for a second year, showing a net loss of Rmb104.62m
(US$17.0m), while the local affiliates of RBS, CLSA, Daiwa
Securities and Citigroup all reported losses in 2012, according
to data from the Securities Association of China.
Among the 10 securities JVs backed by foreign banks, only
the local affiliate of Goldman Sachs reported net profits
greater than US$2m.
The latest results show that a slump in new share listings
is having a bigger impact on foreign-backed brokerages, as most
are only allowed to underwrite primary offerings. Of China's 114
securities houses, only 16 recorded losses last year, and five
of those were backed by overseas banks.
China's regulators have blocked domestic IPOs since last
November to allow an audit of new listings and restore
confidence in the wider equity market.
Goldman Sachs Gao Hua Securities posted net profits of
Rmb75.44m, an increase of 50.46% year on year, while its
operating revenue rose 24.85% to Rmb658m.
The net profit of UBS Securities tumbled 76.00%
year on year to Rmb11.27m, partly due to a 52.65% decline in its
securities underwriting business.
Credit Suisse Founder Securities and Deutsche
Bank's Zhong De Securities increased net profits to
Rmb6.30m and Rmb4.80m, respectively, up 38.77% and 38.73% on
JP Morgan First Capital Securities turned in a net
profit of Rmb0.66m in its second year of operation, a turnaround
from a loss of Rmb37.59m in its inaugural year.
Of the five loss-making JVs, three have operated for only
two years. RBS affiliate Huaying Securities made a net
loss of Rmb24.73m, versus a Rmb24.58m loss in 2011.
Citi Orient Securities posted a net loss of Rmb55.96m
in its first year. Morgan Stanley Huaxin Securities posted the
biggest loss for the second consecutive year, at Rmb104.62m,
although its loss narrowed 31% year on year.
Daiwa SSC Securities registered a net loss of
Rmb8.71m, compared with a loss of Rmb21.93m in 2011, while
Fortune CLSA Securities lost Rmb17.45m, versus a loss of
Rmb13.45m in 2011.
The top-performing Sino-foreign JV, according to the
Securities Association, was BOC International (China) with
profits of Rmb353.45m, down 5.64% year on year. Brokerage and
securities underwriting businesses were the main sources of the
its revenue. Hong Kong-based BOCI is the foreign shareholder.
The second most profitable JV was CICC, which recorded a
stellar performance in investment income, thanks to China's
red-hot bond market. CICC, part-owned by overseas investors
including TPG and KKR, recorded a net profit of Rmb279.59m, up
about 9.74 times on the previous year.
Even those numbers, however, fell far short of the top local
players. Citic Securities, the most profitable bank in China,
recorded a net profit of Rmb4.24bn in 2012.