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JPMorgan (JPM) Gets Nod for 100% Stake in China Securities JV

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JPMorgan JPM has received regulatory approval to obtain full ownership of its China securities joint venture (“JV”). The China Securities Regulatory Commission (“CSRC”) has granted the Wall Street banking giant the permission to own a 100% stake in J.P. Morgan Securities (China) Co.

Presently, China and the United States are grappling with trade tensions. However, the approval shows that financial firms in the United States are moving ahead with their plans of increasing presence in China despite the ongoing issues between the nations.

JPMorgan’s CEO, Jamie Dimon, stated, “China represents one of the largest opportunities in the world for many of our clients and for JPMorgan Chase. Our scale and global capabilities give us a unique ability to help Chinese companies grow internationally and also support global investors as they expand into China’s maturing capital markets.”

Given that China’s $53-trillion financial market is open to foreign firms, following the removal of restrictions on ownership, the biggest U.S. bank (in terms of assets) like other global firms has been rushing to capitalize on the opportunity.

In November 2020, JPMorgan already raised its stake in the securities venture to 71%, which came after the company completed the transaction to buy a 20% stake from one of the local partners — Shanghai Waigaoqiao FTZ — for 177.7 million yuan ($26 million).

Also, the bank has obtained full control of its futures JV in China, J.P.Morgan Futures Co., after receiving regulatory approval from the CSRC to increase the stake to 100% from 49%.

Notably, JPMorgan has decided to get full ownership of all of its mainland China operations by the end of this year, which is part of its four-year investment plan in the country.

While the latest approval makes JPMorgan the first foreign firm to fully control a securities venture in China, others like Goldman Sachs GS have also begun the process of receiving clearance from regulators for obtaining full control of its securities JV in the nation.

Firms like Nomura Holdings, Morgan Stanley MS and UBS Group UBS have either won approval or are waiting for the same to increase stakes in their respective JVs in China.

Our Take

JPMorgan’s initiatives to expand branch network in new markets are expected to continue supporting profitability. Its inorganic expansion strategy along with a decent mortgage banking business is likely to aid growth.

So far this year, shares of JPMorgan have gained 23.9% compared with 28.6% growth recorded by the industry.

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