UBS Plans To Increase Its Holding Of UBS Securities To 67% Of Its Wholly-Owned Holding Securities Companies

Joint venture securities companies in China also exposed equity changes.

According to the official website of Beijing Equity Exchange, recently, state energy group Capital Holding Co., Ltd. (hereinafter referred to as "state energy group") and Guangdong Communications Group Co., Ltd. (hereinafter referred to as "Guangdong Communications Group") are planning to transfer their shares of UBS Securities.

Among them, the state energy group plans to transfer 1.99% of the shares, with a base price of 67.33 008 million yuan, and Guangdong Communications Group plans to transfer 14.01% of the shares with a base price of 474 million yuan. This is also the full stake in UBS Securities held by the two companies.

According to the 21st century economic report, if all goes well, the 16% stake in UBS Securities will eventually be transferred by UBS group.

In fact, in addition to UBS Securities, other foreign institutions that have entered the Chinese market have also made frequent moves in recent months. In the past, Goldman Sachs Group started the process of acquiring 100% equity of Goldman Sachs Gaohua. Later, Huaxin securities planned to publicly transfer 39% equity of Morgan Stanley Huaxin securities. Senior executives of J.P. Morgan and Credit Suisse Group in China have also successively voiced their willingness to wholly control securities companies in China.

As a securities company established after restructuring the former Beijing securities, UBS Securities has a history of nearly 15 years. Visual China

After holding shares, the company will increase its stake

As a securities company established after restructuring the former Beijing securities, UBS Securities has a history of nearly 15 years.

In addition to UBS group holding 51% of the shares, among the existing shareholders, Beijing SASAC holds 33% of UBS Securities, Guangdong Communications Group holds 14.01% and state energy group holds 1.99%. Among them, 1.99% of the shares held by state energy group were acquired from China Guodian Capital Holding Co., Ltd. by the end of 2020, and Guangdong Communications Group has acquired UBS Securities equity from Central Huijin since 2014.

In April 2018, China Securities Regulatory Commission (CSRC) officially issued the relevant policy to allow foreign-funded joint venture securities companies to hold 51% shares. UBS group immediately applied for this policy. By the end of that year, the CSRC officially approved UBS AG to increase its shareholding in UBS Securities, a joint venture securities company, with the shareholding ratio increased from 24.99% to 51%. UBS acquired 12.01% and 14% shares of UBS Securities held by China Guodian Capital Holding Co., Ltd. and COFCO Group Co., Ltd., respectively, and became the first foreign financial institution in China to control a joint venture securities company by increasing its shareholding.

According to the announcement of Beijing Equity Exchange, the total transfer price of the shares of UBS Securities held by state energy group and Guangdong Communications Group is 541 million yuan. If two or more qualified prospective transferees are finally recruited, the final transferee will be determined by online bidding, while UBS group, as the existing shareholder, has the preemptive right.

"Previously, Morgan Stanley received the shares of Morgan Stanley Huaxin, which was the only transferee. When UBS held UBS Securities, it also set up the priority subscription of current shareholders, and all the shares must be taken. Finally, UBS had the intention to do so." A senior investment bank in Beijing believes that UBS group may be the only qualified transferee for the equity change of UBS Securities.

UBS group also confirmed to 21st century economic reporter that the company was determined as the transferee of the equity transfer. UBS officials said the further opening up of China's financial industry has brought significant opportunities for all UBS businesses in China, including wealth management, asset management and investment banking. UBS has been committed to developing the Chinese market and will continue to invest strategically. "Our further increase in UBS Securities confirms our commitment to the Chinese market."

According to the financial report data of UBS Securities in 2019, the company realized revenue of 832 million yuan and net profit of 10.8527 million yuan. As of February 28, 2021, the total assets of UBS Securities were 7.232 billion yuan, an increase of 2.27 billion yuan compared with the end of 2019. The company's monthly revenue also reached 1.197 billion yuan, but the net profit was 18.715 million yuan.

Wholly owned securities companies are brewing

Although UBS group is planning to take 60% of UBS Securities, according to 21st century economic report, the company has no plan to wholly control UBS Securities.

"There are no specific plans at the moment." When asked whether UBS group will further increase its stake in UBS Securities to 100%, a person in charge of UBS said it would work closely with Beijing state owned Assets Management Co., Ltd., another major shareholder of UBS Securities, which currently holds 33% of UBS Securities.

It is worth mentioning that Morgan Stanley shares similar ideas with UBS.

On February 5 this year, Huaxin shares announced that Huaxin securities, a wholly-owned subsidiary of the company, intends to publicly transfer 39% of the shares of Morgan Stanley Huaxin securities and 36% of the shares of Morgan Stanley Huaxin Fund. If the transfer is successful, Huaxin securities will no longer hold the equity of Morgan Stanley Huaxin Fund, but will still hold the last 10% equity of Morgan Stanley Huaxin securities.

At present, Morgan Stanley is holding 51% of the shares of Morgan Huaxin and 49% of the shares of Morgan Huaxin Fund. According to people close to the deal told the 21st century economic report that Morgan Stanley intends to take the shares of the two enterprises in this public listing transfer.

Such a smooth transfer, Morgan Stanley will hold 90% of the shares of Morgan Huaxin, and the remaining 10% will still be held by Huaxin securities. According to the people close to the transaction, in the future, Morgan Stanley may no longer acquire the 10% equity held by Huaxin securities and only control the operation of Morgan Huaxin securities. Both sides will jointly promote the development of Morgan Huaxin securities.

As for Morgan Huaxin Fund, after the acquisition, Morgan Stanley will only hold 85% of the shares, and the remaining 15% will be held by Shenzhen cornerstone Venture Capital Co., Ltd.

There are not only conspirators for development, but also foreign institutions seeking wholly-owned shares.

In April 2018, China Securities Regulatory Commission (CSRC) issued and implemented the measures for the administration of foreign invested securities companies, making major adjustments to the restrictions on the shareholding ratio of foreign investors. For the first time, joint venture securities companies were allowed to hold up to 51% of foreign shares. Two years later, in April 2020, China Securities Regulatory Commission officially lifted the restrictions on the ratio of foreign shares of securities companies.

In December 2020, 21st century economic reporter learned from Goldman Sachs that Goldman Sachs has started the process of acquiring 100% equity of the joint venture company Gaosheng Gaohua, which is also the first substantive action taken by a foreign-funded organization to seek a sole proprietorship in China.

Tang Zhenyi, chief executive officer of Credit Suisse China, also said in public that he would "seek to ultimately increase the shareholding ratio of joint venture securities companies to 100%", "we are actively preparing to apply for more licenses and plan to rename the holding securities companies.". After increasing the shareholding ratio of JPMorgan securities (China) to 71%, JPMorgan also intends to achieve a wholly-owned control of JPMorgan securities. In addition, in the field of public offering and futures, JP Morgan has made frequent efforts, and its intention to establish a wholly-owned public offering fund and futures company in China is obvious.

Foreign investment is advancing step by step

As foreign institutions continue to increase the size of joint venture securities companies, the domestic securities industry will increasingly feel the impact of "outsiders".

According to the statistics of 21st century economic report, there are 8 joint venture securities companies in China. Four of them are new joint venture securities companies, including JP Morgan Securities, Nomura Orient International Securities, Daiwa Securities and DBS securities. The other four companies increased the shareholding ratio to achieve holding for foreign institutions, including UBS Securities, Goldman Sachs Gaohua securities, Credit Suisse Founder Securities and Morgan Huaxin securities.

Most foreign institutions choose wealth management, investment bank recommendation and self investment business. For example, Nomura Orient International Securities holds four licenses for asset management, wealth management, securities brokerage and investment consulting; Morgan general holds securities brokerage, investment consulting, securities self operation, securities underwriting and recommendation license.

At the end of 2020, Daiwa Securities, which opened recently, aims at three major tracks: securities brokerage, securities underwriting and recommendation, and securities self-management. Some people close to Daiwa Securities said that the core business talents needed for the company's opening had already arrived. At present, some basic positions such as cashier and audit are being added according to the business needs.

The non bank team of Societe Generale has predicted that the key strategic layout of foreign securities companies' development in China in the future will be in the fields of cross-border investment banking, wealth management and sales and trading business.

Among them, foreign securities companies have rich experience in cross-border stock and debt underwriting, cross-border mergers and acquisitions, and have inherent competitive advantages. On the other hand, although foreign securities companies have some shortcomings in traditional retail brokerage, some foreign securities companies have built mature business models in the field of wealth management, with professional global asset allocation ability and high-quality customer service ability. It is expected that the entry of foreign securities companies will face competition from domestic private banks, third-party financial management, trust, fund and comprehensive securities companies, bringing new development opportunities to the wealth management market.

In the field of sales and trading business, Societe Generale Securities believes that foreign securities companies have more experience in investment and trading and diversified design capabilities. With the increasing demand of institutional investors for rigid hedging, it is expected that foreign securities associations will continue to make efforts in sales and trading business, especially in cross-border business and derivatives business.

"The institutional construction and regulatory environment of the market in which foreign investment banks are located are much more mature than in China, and are more conducive to the development of investment banks." Zhang Xing, President of Gaohua securities, said that foreign securities companies have certain advantages in technical management and business structure. For example, the investment banking business of domestic securities companies is mainly underwriting, while overseas securities companies are more inclined to merger and acquisition. Foreign securities companies also do not participate in margin trading and other credit business, and are more alert to the risks. In the brokerage business and self-supporting business, foreign securities companies mainly trade, and will not bet against the market with capital, but make profits while using capital to provide liquidity for customers.

"Generally speaking, although foreign securities companies have not yet formed a climate in China, they have made domestic securities companies start to be vigilant." A non bank analyst of a small and medium-sized securities firm in Beijing believes that due to the restrictions on business licenses and the lack of business outlets, foreign securities companies have had a difficult start in the past. However, under the background of opening up the capital market, joint venture securities companies will bring impact on the investment banking business of recommending Chinese enterprises to be listed overseas and the wealth management business dominated by the allocation of major global assets and derivatives. "These are actually relatively" lame "businesses of domestic securities companies

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