Date
19 November 2017
Haitong International CEO Lin Yong (second from right) believes China will allow more cross-business initiatives for firms engaged in financial services. Photo: EJ Insight
Haitong International CEO Lin Yong (second from right) believes China will allow more cross-business initiatives for firms engaged in financial services. Photo: EJ Insight

Haitong sees banking window opened up for China brokerages

China’s signal that it will grant securities business licenses to banks boosts hopes that brokerage firms will in turn be allowed to enter the banking space, the head of a leading mainland brokerage said on Wednesday. 

“I am very happy that this is going to happen. I think we can also get banking licenses in the future,” said Lin Yong, the chief executive of Haitong International Securities Group (00665.HK).

As banks move into securities business and authorities also allow other cross-business initiatives, there will be regulatory overlaps among different agencies, he noted.

The regulatory overlaps could pave way for some changes in the way the industries are overseen, Lin said. 

“When you see that banks can get securities licenses, it means [the practice of] ‘regulating by sectors’ will be broken,” he said.

China currently has a specific regulatory body for each financial sector.

The China Securities Regulatory Commission (CSRC), the China Banking Regulatory Commission (CBRC) and China Insurance Regulatory Commission (CIRC) oversee the securities, banking and insurance industries respectively.

Lin said that brokerage firms will be able to engage in high-end wealth management business if they get banking licenses.

“It will fundamentally change the revenue model of brokerage firms,” the Haitong chief said.

The CSRC said last week that it was considering allowing banks to apply for securities licenses. It however did not give any definite timetable.

Haitong International’s net profit jumped 92 percent to HK$1.01 billion for the year ended December. Revenue grew 65 percent to HK$2.7 billion, with 43 percent contributed by the brokerage and financing operations.

“We were the biggest beneficiary of the Shanghai-Hong Kong Stock Connect … We hope to have another year of rapid growth after the expected launch of a bourse link involving the Shenzhen exchange this year,” said Lin.

The Stock Connect “will have a very positive impact on our commission income,” said Wilson Hui, executive director at Haitong International. “I estimate the increase to be 50 percent to 100 percent.” 

Lin said his firm also hopes to capitalize on China’s “One Belt One Road” initiative. The company will develop fixed income, currency and commodities products and make overseas acquisitions to benefit from the nation’s strategic development plan, he said.

“In 10 years, the biggest export of China will be yuan, financial services and investments,” Lin said.

The One Belt One Road incorporates the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road” initiatives, which aim to improve transport links with China’s neighbors in Central Asia and to expand the nation’s trade ties with Southeast Asia.

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JH/JP/RC

EJ Insight reporter

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