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Credit Suisse (CS) to Own 100% of China Securities Joint Venture

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Credit Suisse Group AG is preparing to fully own its securities joint venture (JV) in China. Credit Suisse has entered an agreement to buy out its local partner, Founder Securities’ 49% stake in Credit Suisse Founder Securities for 1.14 billion yuan ($163.92 million), following which CS will have complete control of its onshore securities venture.

The move comes a few days after the bank’s top management discussed growth strategy at a meeting in Singapore.

Carsten Stoehr, the CEO of Greater China at Credit Suisse, stated, “China is a key part of our Asia Pacific and global strategy.”

Notably, Credit Suisse Founder Securities was formed in 2008 as a JV between Credit Suisse and Founder Securities. The JV provides various capital market services to clients in the domestic China market, which include sponsoring and underwriting A shares, foreign investment shares, and government and corporate bonds, along with financial advisory services.

In June 2020, the Swiss bank raised its shareholding in the JV to 51% from 33.3%, following the opening up of the China markets for foreign financial firms with the removal of restrictions on foreign ownership.

Back then, CS had made it clear that it wanted to eventually acquire full control of the JV.

However, the journey to acquire the remaining stake in the business faced setbacks.

Departures of several senior executives, including the CFO Annie Qiu, the compliance head Xu Yang and CIO Larry Tung, raised questions about the stability at the venture and the prospect of it meeting regulatory requirements to launch new business.

Now that Credit Suisse’s plans are becoming a reality, Stoehr said, “We continue to be committed to our China business because we understand that these are ... long-term investments and commitments, and whatever the procedures, timing or steps that need to be taken, we go through diligently. Our overall approach and our commitment has not in any way been wavering.”

Per a source familiar with the matter, both firms want to complete the stake transfer at the earliest in the first quarter of 2023. Once the stake transfer is complete, CS will go through a filing process with China’s securities regulator.

The deal will make Credit Suisse the latest global bank to fully own its onshore securities venture after JPMorgan (JPM - Free Report) and Goldman Sachs (GS - Free Report) .

JPMorgan and Goldman Sachs received approvals to own 100% of their onshore securities JVs in August and October 2021, respectively. Like Credit Suisse, GS and JPM plan to expand in China to diversify revenues, and increase their global footprint and market share.

Our Take

Credit Suisse’s expansion plans come when the bank is cutting jobs and costs elsewhere as part of its efforts to recover from a string of losses and scandals.

The company has been facing a string of scandals of late. Hence, it has decided to make swift progress on its risk management and compliance overhaul. The bank plans to cut 5,000 jobs. By using technology, it plans to achieve 200 million Swiss francs ($209.1 million) in cost savings in 2022 and 2023 each, with a further 400-million franc reduction in the medium term.

CS’ new CEO, Ulrich Koerner, who became CEO in August after the removal of Thomas Gottstein, is under immense pressure to turn things around for the bank.

Koerner has taken the responsibility of repositioning its investment bank in the tough macroeconomic and market environment as it seeks to achieve a more stable, capital light and better-aligned investment banking business.

Over the past year, shares of CS have lost 48.9% compared with a decline of 8.2% of the industry.


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Currently, Credit Suisse carries a Zacks Rank #5 (Strong Sell).

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