Sunday 7 March 2010
JP Morgan close to getting partner in securities venture on mainland
Gaby Abdelnour, JP Morgan Chase Asia-Pacific chief executive, slaps the table three times as he spells out his ambition to end the firm’s five-year wait to enter China’s securities market: “I told everyone, I want to do a JV this year.”
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JP Morgan close to getting partner in securities venture on mainland
Bloomberg
06 March 2010
Gaby Abdelnour, JP Morgan Chase Asia-Pacific chief executive, slaps the table three times as he spells out his ambition to end the firm’s five-year wait to enter China’s securities market: “I told everyone, I want to do a JV this year.”
At a town hall meeting in January, Abdelnour told about 500 of the firm’s employees in Asia that they are nearer to that goal. JP Morgan has identified a partner for a securities joint venture in China and aims to sign an initial agreement as soon as next week, executives close to JP Morgan said. The people, who requested anonymity because the talks are private, declined to identify the firm. JP Morgan chief executive Jamie Dimon steered the firm through the global financial crisis, emerging as the only top Wall Street bank to avoid posting a quarterly loss. In China, the company has failed to plug gaps in its business, while rivals Goldman Sachs and UBS found the local partners that are a prerequisite for arranging share sales in the world’s biggest market for initial public offerings last year.
“Dimon’s reputation is the best in America,” said Donald Straszheim, senior managing director of China research at International Strategy & Investment Group and a former Merrill Lynch chief economist. “It would be astonishing if JP Morgan didn’t keep pushing the China opportunity.”
Sitting in a 27th-floor meeting room in JP Morgan’s Hong Kong office, with a view across the harbour towards southern China, Abdelnour voiced his frustration at the advantage Goldman Sachs and UBS have won while JP Morgan spent four years in dead-end talks with Bohai Securities and Liaoning Securities.
“I hate having wasted the time,” Abdelnour said early this week. “We wasted several years and this is a lot of time, a lot of money and a lot of effort. That’s the thing that bothers me most,” he said, adding that he is now spending as much as 40 per cent of his time on the mainland, making five visits in the first two months of this year.
Abdelnour, who declined to comment on the joint-venture talks, was tapped to run JP Morgan’s Asia-Pacific business in July 2006, six months after the firm started discussions with Bohai Securities.
The talks went on for about two years before falling apart.
“We should have been way ahead,” the 12-year veteran of the firm said. “Can I turn back the clock? No. I can learn from our experience and move on.”
Abdelnour said he aims for China to contribute about 25 per cent of the bank’s Asia revenue “over time” from around 10 per cent to 15 per cent “through the cycle”. Investment banking, commercial banking and asset management each contribute about a third of revenue in the country.
During the past two years, ventures backed by Credit Suisse Group and Deutsche Bank have won regulatory approval to underwrite stock and bond sales in China.
“From a profitability standpoint, I probably didn’t miss anything,” Abdelnour said. In terms of “market share, I missed something. The ability to be there ahead of everybody else and capture market share makes a big difference, of course. But we can claw it back.”
JP Morgan, which has asset management, futures and options ventures and operates a locally incorporated bank in China, will still face a five-year wait to qualify for a brokerage licence under rules set out by the China Securities Regulatory Commission.
“Guess what? We in the West want to move at our own fast pace, and China moves at its own pace,” Abdelnour said. “They’re the host: I’m the guest and I have to adapt.”
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