JPMorgan inches closer to taking 71% of China securities JV

BEIJING (Reuters) – JPMorgan <JPM.N> has first right to buy a 20% stake in its Chinese securities joint venture that has been put up for sale by one of its local partners for 177.7 million yuan ($26.02 million), a filing by the partner showed on Thursday.

The potential transaction could take the U.S. bank’s stake from 51% to 71% as it edges closer to full ownership of a securities entity in China at a time when geopolitical relations between the United States and China remain fragile.

A JPMorgan spokesman declined to comment on the likely sale.

The state-owned Shanghai Waigaoqiao FTZ is selling its stake in the joint venture, which made a net loss of 86.8 million yuan in 2019, according to its filing on the Shanghai United Assets and Equity Exchange.

JPMorgan was the only candidate that could raise its ownership with priority rights in the securities joint venture, the filing showed, as the remaining four shareholders had given up their rights to purchase the 20% stake.

The securities joint venture consists of investment banking, research, equities and fixed income businesses.

JPMorgan’s development came after Citigroup received regulatory approval on Wednesday to take full ownership of a custodian business in mainland China.

China has overhauled regulations to grant foreign firms greater access to its financial sector which is worth trillions of dollars.

It has also allowed foreign institutions to fully own companies in the securities and mutual fund sectors since April 1, positioning Wall Street and European banks to compete for a slice of the world’s second-largest economy.

JPMorgan received regulatory approval last December to establish the 51%-owned securities joint venture. The U.S. bank planned to hire at least 12 equity research analysts in China this year, Reuters reported in May, in its first major mainland hiring push.

(Reporting by Zhang Yan and Ryan Woo in Beijing; Editing by Muralikumar Anantharaman and Devika Syamnath)