JPMorgan Chase & Co.
) has infused nearly 2.5 billion Yuan ($394.08 million) in its
Chinese subsidiary - JPMorgan Chase Bank (China) Company - with the
aim to benefit from one of the fastest growing economies. JPMorgan
has also received the permission from the China Banking Regulatory
Commission (CBRC) to open a new branch in Suzhou.
The infusion of the additional money brings the total registered
capital in JPMorgan's Chinese division to about 6.8 billion Yuan
($1,071.9 million). The additional capital will be utilized to
expand its footprints, launch new products and boost corporate
Further, the additional capital will enable JPMorgan to meet
stringent capital requirements. The CBRC has been working to adopt
strict capital adequacy ratios in agreement with the global
standard set by the Basel Committee. The capital ratio set for
larger and important banks is 11.5% while for systemically less
important banks it is fixed at 10.5%.
Moreover, the permission to open a new branch in Suzhou will
enable JPMorgan to meet the financial and banking needs of the
institutional and corporate clients in that region. Suzhou is an
important financial center in the Yangtze River Delta region and is
strategically located, with many global MNCs headquartered
Presently, JPMorgan has its branches in Shanghai, Beijing,
Tianjin, Guangzhou, Chengdu and Harbin. Each of these branches
offer the clients a wide range of products and services through
investment banking, risk management, trade finance, loans, foreign
exchange and derivatives, asset management and private equity.
Apart from these banking branches, JPMorgan also provides
investment banking services in China through a joint venture (JV)
with First Capital Securities Co. Similarly, the company provides
asset management services through China International Fund
Management Co. Ltd, a JV between JPMorgan Asset Management, a unit
of JPMorgan, and Shanghai International Group.
Additionally, earlier this year, JPMorgan has planned to buy a
19.9% stake in China-based Bridge Trust Co., a trust investment
firm. The deal, which is awaiting regulatory approval, would enable
the company to further enhance its top line.
Investments in China by Other Foreign Banks
Over the last few years, many large international banks and
financial institutions have been investing in and expanding their
units on the Chinese soil. Earlier this month, Australia and New
Zealand Banking Group announced its plan to invest A$300 million
($300 million) in its Chinese unit. Likewise in April, Singapore
based DBS Group Holdings Ltd. had announced investments of 2.3
billion Yuan in its Chinese subsidiary.
HSBC Holdings Plc
) had invested 2.8 billion Yuan into its China unit, bringing the
total registered capital to 10.8 billion Yuan.
Similar to JPMorgan's planned investment in a Chinese trust
firm, other international banks like
), Macquarie Capital,
Royal Bank of Scotland
Bank of Montreal
) also have invested in a number of Chinese trust companies.
With the opening up of financial system, China has been
attracting a large number of foreign companies that are willing to
gain market share in one of the fastest growing economies.
According to the Chinese banking regulator, the combined profit of
foreign banks had more than doubled to 16.7 billion Yuan ($2.58
billion) in 2011.
In 2011, JPMorgan recorded an impressive growth in its profit,
which came at 297.3 million Yuan. This was much more than 70.4
million Yuan recorded in 2010. Now, with the introduction of the
additional capital and the opening of new branches, we believe that
the company's profit would report an upward trend going
Currently, JPMorgan retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we
also maintain a long-term 'Neutral' recommendation on the
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