Citi Plans New China Investment Bank Within 18 Months

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Citigroup Inc. is pushing ahead to set up new investment banking and trading operations in China after the lender announced it would be exiting retail banking in the world’s second-largest economy.

The New York-based bank plans to submit an application for a securities license to allow it to underwrite yuan-denominated shares and conduct trading for clients, as well as a license for futures brokering within the next two months, said a person familiar with the matter, who asked not to named because the information is confidential. The aim is to get the businesses up and running in 12 to 18 months, the person said.

A chief executive officer will soon be named for the business and 50 people will be hired initially with a plan to grow to about 100 over time, the person said. The bulk will be external hires but it will also transfer bankers from other mainland businesses to fill the gap, the person said. The U.S. bank is a late entrant into China’s securities market after the country lifted foreign ownership restrictions and allowed full control starting last year, as it was in the process of unwinding a venture with Orient Securities Co.

Foreign banks have aggressive plans to expand in China -- seeking to double or even triple their staffing -- as the country opens its $54 trillion financial market. They have had limited success over the past decade with joint ventures, which in many cases have been unprofitable. Goldman Sachs Group Inc. and JPMorgan Chase & Co. are vying to become the first Wall Street banks to achieve full ownership of securities operations on the mainland.

UBS Group AG, the first foreign bank to win approval for majority control of its China securities venture, is planning to buy another 16% stake; while Goldman has struck an agreement with its partner to snap up the 49% it doesn’t own. JPMorgan in November raised its stake to 71%. Credit Suisse Group AG is ramping up its ambitions and is seeking to take full control of its securities venture over the next year.

Citigroup continues to explore opportunities to support clients in China, a Hong Kong-based spokesman said, declining to comment when asked about the license and hiring plans. Global Times earlier reported the bank’s plans to apply for stock and futures trading license in China, without giving details.

The push for licenses comes as Citigroup announced plans to exit retail banking in China and other markets across Asia and Europe, Middle East and Africa.

Citi Plans New China Investment Bank Within 18 Months

Citigroup is expanding in wealth management and last week announced plans to hire more than 300 relationship managers in Hong to double its assets by 2025. In March, it said it would hire up to 1,700 staff in the financial hub as it seeks to tap growing links between the city and rising affluence in southern mainland cities such as Shenzhen.

The bank serves close to 1,000 multinationals with operations in China and more than 350 local corporates. It has raised more than $30 billion for domestic Chinese clients from global capital markets in the past 12 months, the spokesman said.

Citigroup received a domestic custody license last year and already has licenses to settle and underwrite bonds for clients in China.

©2021 Bloomberg L.P.

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