Merchants bank approved to buy control of fund venture

Merchants bank approved to buy control of fund venture

China Merchants Bank Co., the nation's seventh-largest, won government approval to buy 33.4 percent of an affiliated fund management venture, allowing it to expand its sources of income beyond lending.

Merchants Bank will become the largest shareholder in China Merchants Fund Management Co., the Shenzhen-based company said in a statement today. China Merchants Securities Co. and ING Groep NV's asset management arm each own 33.3 percent of the venture.
China is letting domestic banks expand into broking, fund management and insurance, winding back former premier Zhu Rongji's 1993 restrictions to help them boost profits. Foreign rivals Citigroup Inc. and HSBC Holdings Plc. have started to compete for China's $2.2 trillion of local-currency deposits.
Chinese banks get more than 90 percent of earnings from interest income -- the difference between what they pay depositors and what they charge on loans. That compares with 65 percent overseas, according to China Chengxin International Credit Ratings Co., a domestic credit rating company.
Domestic lenders were allowed in February 2005 to set up fund ventures with foreign investors to develop the nation's capital markets. Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Bank of Communications Ltd. have started such ventures.
China's fund industry almost doubled in size last year as soaring prices drew more investors, reaching 856 billion yuan ($111 billion) of assets under management, according to Shanghai- based research firm Z-Ben Advisors Ltd. The benchmark CSI 300 Index has quadrupled from its July 2005 low.
Shenzhen-based Merchants Fund Management was set up in December 2002 with 20 billion yuan ($2.6 billion) in assets. Merchants Bank bought the stake from China Power Finance Co., China Huaneng Finance Co., Cosco Finance Co. and Merchants Securities, it said today, without giving details on pricing.