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Deutsche Bank (DB) Gets Fund Custody License in China From Regulators

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With China liberalizing its mutual funds sector wider for global firms, Deutsche Bank (DB - Free Report) recently received a domestic fund custody license from Chinese regulators. On completion of the relevant administrative process, the German bank will be accessible in providing direct custody-related solutions to funds established in China.

Notably, the license granted will aid the banking giant in serving people domiciled in China with its custody-related services to both mutual funds and private funds. However, the bank awaits clearance of the administrative process. Deutsche Bank follows Citigroup (C - Free Report) — the first U.S. bank to get such a permit this September.

The development follows the opening up of the Chinese markets to foreign financial firms. China’s securities regulator — The China Securities Regulatory Commission (CSRC) — and the China Banking and Insurance Regulatory Commission came up with the permit of allowing local branches of foreign banks for application of fund custody licenses this year.

The CSRC has also eased rules for the foreign ownership of financial services firms in China this year giving way to foreign banks, insurers and asset managers to take majority ownership in their joint ventures (JV) in the country. Since April this year, global fund companies have been permitted to submit applications to the CSRC for approval for buying 100% stakes in fund management JVs. Recently, Goldman Sachs (GS - Free Report) has sought regulatory permission for boosting its stake from 51% to 100% in the securities JV in China.

Therefore, the companies, which got approvals, are being involved in creating and distributing mutual funds for the $2.3-trillion retail investor market in China.

“Many of our global institutional clients are actively exploring and acting on the unfolding opportunity to tap into the exponential China market, which is still fast growing and opening up,” Rose Zhu, Deutsche Bank’s China chief country officer, said in a statement. “At the same time, the booming domestic fund industry is looking for global expertise to foster further development,” Zhu further noted.

Moving with restructuring moves, Deutsche Bank continues to execute growth strategies. Recently, at its Investor Day, CEO Christian Sewing signaled that the bank is well on track to achieve sustainable profitability, which includes bolstering performance while maintaining decent cost and capital levels. Executives of Deutsche Bank also updated investors with new targets that the lender seeks to deliver based on the current scenario. Also, it revealed plans to invest in technology.

Though the bank’s restructuring efforts, including cost-saving measures, look encouraging, it is difficult to determine how much it would gain, considering the prevalent headwinds.

Shares of Deutsche Bank have gained 17.1% over the past six months compared with the industry’s growth of 25.9%. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In addition to Deutsche Bank, various other global finance companies are seeking to expand operations in China as the country removes foreign ownership limits on financial firms and eases rules for mutual funds sector. Some of the firms already taking advantage of the available options include Vanguard Group Inc., JPMorgan (JPM - Free Report) , UBS Group, HSBC Holdings and Morgan Stanley.

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