China’s top investment bank CICC plans three-way merger

[HONG KONG] China International Capital Corporation (CICC), the nation’s top investment bank, plans to combine with two smaller brokerages in a restructuring aimed at reshaping China’s securities industry and strengthening its ability to compete with global banking giants.

CICC proposed a share-swap merger with Dongxing Securities and Cinda Securities to support China’s financial market reforms and promote the development of the securities industry, the company said on Wednesday (Nov 19). The three entities will have a combined capital of 11.3 billion yuan (S$2.1 billion), according to the release.

Trading of CICC shares in Shanghai will be suspended and the pause is expected to last no more than 25 days, as the planned merger is relatively complex, according to the statement.

Beijing is trying to cultivate first-class domestic investment banks capable of standing up to global heavyweights, such as Goldman Sachs and Morgan Stanley. The merger aims to fast-track the creation of a world-class firm, boosting the securities industry’s growth, and better serve national strategies, CICC said.

China had been mulling combining its largest state-run investment banks years ago, but progress stalled until President Xi Jinping urged financial regulators in 2023 to cultivate a few top-ranked brokerages. The nation’s securities watchdog also voiced its support for consolidation, with a goal of having two to three banks that can compete globally by 2035.

Guotai Junan Securities and Haitong Securities last year unveiled the terms of their proposed merger to create a state-backed brokerage with US$226 billion in assets.

By combining complementary strengths and resources, CICC aims to achieve economies of scale, boost efficiency and create a more diversified and competitive financial services platform, the company said. The restructuring plan remains subject to approval by the three parties and relevant regulators, and there is still uncertainty over whether it will ultimately proceed, it said.

CICC is one of China’s top investment banks for debut stock sales in Hong Kong, ranking No 1 for initial public offerings (IPOs) in the city this year, data compiled by Bloomberg show. At home, competition is fierce and the firm has not claimed the top spot for IPOs since 2018.

CICC, founded in 1995 with registered capital of 4.8 billion yuan, operates across securities, foreign exchange, and asset management. Dongxing Securities and Cinda Securities, both established in the 2000s with registered capital of 3.2 billion yuan each, bring strong retail and institutional brokerage capabilities as well as extensive experience in underwriting, proprietary trading, and fund management, according to the statement.

Dongxing Securities is a subsidiary of China Orient Asset Management while Cinda Securities is a unit of China Cinda Asset Management. BLOOMBERG