Some long-term commitments do not go the distance, however promising they may look. Yesterday, First Capital Securities, the Shenzhen-listed securities firm, said it was in talks with JPMorgan regarding the latter’s shareholding in a China joint venture between the two. JPMorgan is looking to offload its minority stake in the investment banking JV set up in 2010.
In some ways, the exit comes as no surprise. JPMorgan’s stake of one-third gives it no control over the JV, an uneasy arrangement for the US bank. Of the foreign players with JVs in China only Goldman Sachs and UBS have control (if not majority ownership) over their operations. And JPMorgan First Capital’s business is sub-scale: last year it ranked 59th out of 125 securities companies by revenues, according to official data.
The moment that China finally frees up its markets appears a poor time to be backing away. So JPMorgan has emphasised it is not giving up on the country. Outside of the US, China is the bank’s fifth largest country presence, with $19bn of loans, trading and investment at the end of 2015. This exposure shows up in several divisions, including wholesale banking through a locally incorporated entity, and asset management — both through a 12-year-old JV and a recently granted licence to set up a wholly owned company. JPM has a retail banking allegiance, too. In December last year, it established a strategic co-operation agreement with Postal Savings Bank of China, the country’s sixth largest bank by assets, to collaborate across divisions. As China offers more options for foreign financial institutions, JPMorgan may simply be in search of a new arrangement.