Exclusive-HSBC reaches deal to buy out China fund partner -sources

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FILE PHOTO: FILE PHOTO: HSBC's headquarters in Hong Kong

By Selena Li

HONG KONG (Reuters) -HSBC has agreed to buy out its China fund management joint venture partner, two people familiar with the matter said, as the Asia-focused bank pushes ahead with expansion in the world’s second-largest economy.

HSBC, which currently owns a 49% stake in HSBC Jintrust Fund Management, has signed an agreement with Shanxi Trust under which the Chinese state-owned company will sell its 51% holding in the joint venture to the bank, said the sources.

The transfer is, however, subject to a public auction of the shares and regulatory review and approval, said the sources, who declined to be identified as they were not authorised to speak to media.

If approved, Europe’s biggest bank by assets, which makes the bulk of its revenue and profit in Asia, will expand its presence in the $3.8 trillion fund management market in China.

A spokesperson for HSBC in Hong Kong declined to comment. Representatives for Shanghai-headquartered HSBC Jintrust and Shanxi Trust did not immediately respond to a request for comment.

It was not immediately clear how much HSBC will pay Shanxi Trust to wholly own HSBC Jintrust, which, according to the joint venture’s website, had $7.7 billion in funds under management as of end-March.

HSBC’s move to boost its stake in the fund venture is the lender’s latest to expand its presence in China.

The London-headquartered bank converted its China insurance joint venture to a wholly-owned subsidiary in 2021, and boosted ownership of its China securities joint venture to 90% last year.

HSBC has deployed billions of dollars in China in the last few years as part of an Asia pivot, boosting its market share across banking, insurance and securities businesses in the country’s $57 trillion financial sector.

China, including Hong Kong and the mainland, contributed around 44% of HSBC’s profit in 2022.

CHINA INVESTMENTS

HSBC Chief Executive Noel Quinn visited Beijing in March, when a top official told him China “welcomed an expansion of HSBC’s investment in the country”.

The bank’s signing of the deal for the China fund business comes as it contends with a months-long campaign from shareholder Ping An to hive off its Asia business. HSBC managed to defeat a break-up bid at Friday’s annual investor meeting.

HSBC joins a string of global financial companies including Manulife, JPMorgan and Morgan Stanley in taking advantage of the removal of a foreign ownership cap in 2019 to boost stakes in Chinese fund ventures.

HSBC Global Asset Management, the bank’s fund business unit, is planning an accelerated push to win regulatory approval to bring the ownership change into effect, the sources said.

However, before turning to the regulators, it must cut or offload a majority stake indirectly owned via its subsidiary Hang Seng Bank in 70%-controlled fund unit Hang Seng Qianhai Fund Management, the sources said.

Domestic and foreign firms are subject to China’s “One Majority, One Minority” ownership rule, which means they can’t have more than two fund units in China and only hold majority control of one.

(Reporting by Selena Li; Editing by Sumeet Chatterjee, Kirsten Donovan)

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