JPMorgan banks on China treasury business http://today.reuters.com/business/NewsArticle.aspx?type=businessIndustry&storyID=2006-03-24T083124Z_01_SHA143019_RTRIDST_0_BUSINESSPROIND-FINANCIAL-CHINA-JPMORGAN-DC.XML
Fri Mar 24, 2006
By George Chen
SHANGHAI (Reuters) - JPMorgan (JPM.N: Quote, Profile, Research), the third biggest U.S. bank, expects double-digit growth for its treasury business in China, as multinationals pile into the world's fifth-largest economy.
The New York-based bank also hopes for more cash and capital management business from its Chinese clients -- mainly the large state firms, some of which it is already helping with overseas listings and expansion.
"We are very bullish on the China market," said Mario Tombazzi, vice president for JPMorgan Chase & Co. in Asia Pacific, responsible for treasury services.
"Domestic clients are also developing and expanding dramatically," he told Reuters in an interview in Shanghai, China's financial hub.
JPMorgan's treasury services division, a core part of its wholesale banking unit, helps big firms with wide-ranging businesses to manage their cash. With more multinationals like General Electric Co. (GE.N: Quote, Profile, Research) rushing to China this decade, foreign banks are getting far busier on cash management services there for their existing global clients.
In treasury "we expect a very strong double-digit growth of revenue on a normalized basis in the years to come because we are expanding not only (the number of) our clients but also the client segments we serve," said Tracy Sun, JPMorgan's head of treasury services for China.
Domestic and foreign banks alike are competing to provide cash management services in China to both multinationals and a growing number of major Chinese firms.
GE hired top Shanghai-listed Merchants Bank Co. (600036.SS: Quote, Profile, Research) to manage its multibillion-dollar cash business in China, while Britain's Standard Chartered Plc (STAN.L: Quote, Profile, Research) (2888.HK: Quote, Profile, Research) provides similar services for top China TV maker TCL Corp. (000100.SZ: Quote, Profile, Research).
Sun said a number of large Chinese firms were consulting with JPMorgan on cash management, but declined to give any names.
"The trend is very clear because local companies want to go offshore. Some of them want to set up their own treasury centers and financial companies," Sun said.
STEPPING UP INVESTMENT
China drew nearly $8.6 billion in foreign direct investment in the first two months of the year, up 7.8 percent from a year earlier -- in a sign foreign firms were stepping up their business in Asia's biggest potential market. "You will see a continued interest from (multinationals) wanting to come to China to set up their operations as the market becomes less restricted and more deregulated," Tombazzi said, referring to the commitments China made when it joined the World Trade Organization.
At the same time, Tombazzi noted that more Chinese clients were now looking at markets outside China, like New York and London, for initial public offerings or debt issuances. Those companies might also need a global banks to help them centralize and manage capital flow.
"(China's) capital market is not fully developed while domestic clients now look for access to efficient sources of capital," said Tombazzi, a London Business School graduate.
He said business in mainland China and Hong Kong was one of the highest contributors to revenue for the bank's treasury business in Asia.
JPMorgan has been allowed to offer yuan-denominated business for both foreign and Chinese firms through its branches in Shanghai and Tianjin and has applied for a license for its Beijing branch, partly to meet rising client demand.
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