Credit Suisse to Sell Its China Brokerage Venture

Credit Suisse (CSGN.S) and a joint venture partner are seeking buyers for their China securities brokerage business due to the Swiss bank's takeover by rival UBS (UBSG.S), said two people with direct knowledge of the matter.

Citigroup (C.N) had at one point shown interest in acquiring Credit Suisse Securities China (CSS), they added.

Citi, whose CEO Jane Fraser was in China this week, is setting up a securities brokerage in China. It had hoped to fast-track development via an acquisition but decided to stick to its original plan to grow the business organically, said one of the people.

According to Chinese securities regulations, one entity cannot hold two licenses for majority-owned brokerages. UBS has a 67% stake in a profitable securities venture with Beijing State-owned Asset Management.

Credit Suisse owns 51% of loss-making CSS and struck a deal to buy out its partner Founder Securities (601901.SS) last year. That transaction has yet to receive Chinese regulatory approval.

CSS was established in 2008 in Beijing with Credit Suisse initially owning 33.3% before raising its stake to 51% in 2020. In addition to brokering, it is licenced to conduct underwriting, sponsoring, proprietary trading and to act as an investment consultancy.

It booked a net loss of 254 million yuan ($36 million) in 2022 and had headcount of 234 at the end of last year, according to its annual report. The potential deal value for the business could not be immediately learned.

UBS plans to announce the finalising of its tie-up with Credit Suisse as soon as next Monday.​

The new group will have much work to do to consolidate the banks' operations in China where both have investment banking, wealth, and fund management businesses.

Sources have also said that Credit Suisse has scrapped plans to set up a locally incorporated bank in China due to a potential regulatory conflict arising from the acquisition by UBS.