Wall Street banks struggle to cash in on China hiring binge

·7-min read
A Wall St sign hangs at the New York Stock Exchange (NYSE) at Wall Street on March 23, 2021 in New York City. - Wall Street stocks were under pressure early ahead of congressional testimony from Federal Reserve Chief Jerome Powell as US Treasury bond yields continued to retreat. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)
Wall Street still hasn’t figured out how to make much money in China. (PHOTO: ANGELA WEISS/AFP via Getty Images)

By Bloomberg News

(Bloomberg) — Wall Street still hasn’t figured out how to make much money in China.

Despite the broad market opening, the hundreds of new hires and the billions invested, JPMorgan Chase & Co. and other global investment banks posted a combined loss of about 308 million yuan (US$48 million) last year. Three firms eked out tiny profits from their onshore joint ventures and three had losses. By contrast, China’s investment banks rode a wave of deal making to earn US$24.4 billion, according to filings.

While the trend is promising — revenue is rising and a few banks reversed losses from previous years — the mediocre results show that Wall Street firms still need more time, talent, and even bigger investments to post meaningful earnings in the world’s second-biggest economy.

“While China is a strategic market for global banks they can’t afford to miss, reaping handsome profits here is another thing,” said May Zhao, deputy head of research at Zhongtai Financial International Ltd., a Hong Kong-based brokerage. “Winning clients, either from wealth management or investment banking, is challenging in a highly concentrated market gripped by top Chinese brokers.”

For the investment-banking giants, there’s no bigger opportunity than the US$54 trillion financial services market in China. The government has gradually allowed firms to take full control of their partnerships with local brokers, while giving them a green light to set up their own asset management companies.

Hiring Spree

The banks are rushing in. The U.S. firms alone boosted their China exposure to US$77.8 billion last year, and are hiring hundreds of staff. Many companies have announced pledges to seek 100% of their joint ventures after China removed the caps in April 2020, and several have had 51% stakes for a few years.

Yet for most, gaining control hasn’t yielded much in the way of earnings, and the foreign ventures remain minnows compared with local players like Citic Securities Co. and Haitong Securities Co. UBS, with the biggest joint venture in China, ranks 89th of more than 120 Chinese brokers in terms of assets, figures from the Securities Association of China show. Revenue at China’s brokerages hit a three-year high in 2020 despite the pandemic.

Total assets at Citic Securities broke the 1 trillion yuan threshold for the first time last year as the country’s biggest broker ramps up fundraising to expand. Chinese regulators have called for the creation of an “aircraft carrier-sized” brokerage to take on the foreign competition with the opening of the nation’s financial markets.

“It is very hard — you’re going against Citic, Haitong, all these massive companies that have their own corporate clients,” said Peter Alexander, managing director of Z-Ben Advisors Ltd., a research and data firm in Shanghai. “You’re fighting an uphill battle unless you’re looking to leverage your global clients.”

Zhao said rising costs to expand operations and staff, entrenched local competition, ever-changing regulations that halted Ant Group Co.’s public listing, and political tensions with the U.S. may keep some Wall Street banks in the red for the next few years.

Here’s a look at how each of the major firms fared in 2020 based on recent filings, along with an update on their expansion plans. The figures largely exclude China revenue generated from overseas listings and offshore wealth advisory.


The Swiss giant is the largest and most profitable of the foreign banks, as net income at its joint venture jumped sixfold to 63 million yuan last year from 2019.

UBS, with a staff of 361 at its China securities arm and 1,300 in the country overall, has seen revenue growth across its brokerage, investment-banking and asset-management units. Net fees and commission income from investment banking grew 51% to 207 million yuan.

Led by China head Eugene Qian, UBS in 2018 became the first foreign lender to take a controlling stake after China announced its opening, and the bank plans to raise the stake to 67%.

“We are committed to the China market and will continue to invest strategically,” the bank said in a statement. “Our further stake interest in UBS Securities demonstrates such commitment.”

Credit Suisse

UBS’s Swiss rival turned a small profit of 11 million yuan on its venture with Founder Securities Co., reversing losses since 2018. Fee income from the brokerage business jumped 165% to 188.4 million yuan, while net fee and commission income from investment banking rose 53%.

Credit Suisse Group AG owns 51% of the venture and intends to take 100% as soon as possible, Asia Pacific Chief Executive Officer Helman Sitohang said in a Bloomberg interview in February. The bank plans to triple its headcount in China over the next three years.

Credit Suisse declined to comment.

Morgan Stanley

Morgan Stanley posted earnings of 1.4 million yuan, ending three years of losses, led by fees from deals on the Nasdaq-like Star Board including Semiconductor Manufacturing International Corp., the largest IPO on the new market so far.

Wei Sun Christianson

Morgan Stanley, led by Wei Sun Christianson in Beijing, agreed to raise its stake to 90% by buying shares from partner China Fortune Securities Co. in May for 570 million yuan. The bank, which has had a presence in China since 1994, ranks eighth in arranging deals for Chinese companies over the past 12 months, trailing global rivals Goldman Sachs Group Inc. and UBS.

Morgan Stanley didn’t reply to an email seeking comment.


The largest U.S. bank had a loss of 178 million yuan, the biggest of any global firm.

JPMorgan had revenue of 212 million yuan, one fifth that of UBS in the first year of financial results for its new joint venture. Operating charges in the new shop rose to 393 million yuan, eroding earnings. The bank exited a former partnership in 2017.

JPMorgan, which has been in China for a century, owns about 71% of its joint venture with a slew of firms including Shanghai Waigaoqiao Free Trade Zone Group Co. It has applied for 100% ownership, with the aim of getting it done “as soon as possible,” China CEO Mark Leung said in an interview with Bloomberg Television on June 3.

“We take a long term view of our strategy,” a spokeswoman said, adding the firm “has strengthened our domestic platform and onshore capabilities and continues to make progress.”

Goldman Sachs

Goldman Sachs, which hasn’t reported China results for 2020, is on a hiring spree to ramp up investment banking and asset management.

The firm, in China for 27 years, is in the process of adding 320 staff, including 70 for investment banking, a person familiar with the matter said last month. The New York-based company is awaiting approval to take 100% ownership of Goldman Sachs Gao Hua, and last month agreed to set up a new asset management joint venture with Industrial & Commercial Bank of China Ltd., the country’s biggest bank.

Goldman declined to comment.


The loss at the Japanese broker’s joint venture was 69 million yuan from 54 million yuan as the Tokyo-based firm boosted spending on operations.

Nomura Holdings Inc., which opened in China at the end of 2019, hasn’t set up an investment-banking business yet so brokerage and asset management contribute most of its revenue.

The bank plans to add an investment banking division by 2023 to become a full-licensed broker, and plans to more than double its headcount to 500, group CEO Koji Nagai said in a forum in 2019.

A spokeswoman for Nomura declined to comment.


London-based HSBC Holdings Plc posted a narrower loss of 135 million yuan, from 178 million yuan a year earlier. The joint venture with Qianhai Financial Holdings Co. has lost money every year since it began reporting results in 2017.

The bank hired 202 people in 2020 across all business lines from investment banking, brokerage, research and asset management. HSBC owns 51% of the partnership, and executives haven’t made any public comments about raising the stake.

“We remain fully committed to the venture as an important part of the group’s pivot to Asia,” a bank spokesperson said.

© 2021 Bloomberg L.P.

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