CITIC Securities seals deal with CLSA

Caution with ambitions

Although being a major investment bank in China, CITIC Securities still lags behind international financial giants in research and brokerage. Yin Ke, CEO of CITIC Securities, says CITIC Securities aspires to be the Goldman Sachs of Asia.

CITIC Securities has tried before to expand overseas. As early as October 2007, it signed an all-encompassing strategic cooperation scheme with Bear Stearns Companies Inc. from Wall Street. The Chinese investment bank initially planned to invest about $1 billion in Bear Stearns' convertible trust securities, which accounted for 6 percent of the US investment bank's stakes.

But since then, Bear Stearn's share price has plunged 74 percent. While the agreement was under review by Chinese supervision authorities, the sub-prime crisis broke out and the former fifth largest American investment bank took a substantial hit. Fortunately, CITIC Securities dodged a bullet.

Though its strategic cooperation plan with Bear Stearns was terminated, CITIC Securities said that its strategy hadn't changed and it would continue to see opportunities abroad. While pursuing CLSA, it also completed an H-share listing, paving the way for international business. In October 2011, CITIC Securities went public in Hong Kong at a price of HK$13.3 ($1.72), raising approximately $2 billion.

The purchase of CLSA marks a solid step toward internationalization by CITIC Securities. It would equip CITIC Securities with an overseas research component, something it has longed for. The marriage allows both to share research results and to intensify cooperation in the stock market as well as in merger and acquisition consulting.

Most industrial insiders believe while the acquisition would give CITIC Securities a stronger voice in overseas business, risks still persist. And the biggest challenge CLSA now faces is how to integrate the two and develop synergy.

CLSA's Asia-Pacific business mainly includes brokerage, investment banking and private equity businesses. In its shareholding structure, Crédit Agricole's corporate and investment banking unit owns 65 percent of CLSA, with the broker's staff owning 35 percent.

As everyone in the trade knows, management and a strong core team are most vital for international investment banks. For this reason, after the completion of the CLSA takeover, it is of prime importance to preserve CLSA's talent.

Yin noted that CITIC Securities didn't intend to integrate CLSA into a single platform, and it would retain CLSA's independence and management for a period of time.

"Only by providing customers with differentiated services and holding independent views on the international stage can Chinese investment banks build up their credit overseas and help Chinese listed companies go abroad."