The Shanghai Pudong Development Bank (SPDB) said yesterday it
had received China Banking Regulatory Commission approval to set up
a fund management joint venture.
The SPDB will cooperate with French financial firm AXA SA and
Shanghai Dragon Investment Co Ltd to establish the joint venture,
with SPDB holding a controlling stake of 51 percent, according to
the bank's announcement to the Shanghai Stock Exchange (SSE).
"The fund management joint venture will expand our service range
and deepen the integrated service," said Shen Si, secretary of the
SPDB board of directors, adding that the joint venture still needs
approval from the China Securities Regulatory Commission.
The SPDB, part of the second trial batch of banks to set up fund
management companies, submitted its application last year along
with the Agricultural Bank of China, Bank of China and China
Minsheng Banking Corp Ltd. The SPDB posted net profit of 3.35
billion yuan in 2006, an increase of 31 percent on the previous
year.
Analysts said the fund management joint venture would increase
the bank's income from fee-based intermediate services, which
accounted for only 5 percent of its total revenue in 2006.
"It will help banks to increase their investment gain, thus
adding to their income from intermediate services," said Zhao
Xinge, a professor from the China Europe International Business
School.
Qian Kun, an analyst at Changjiang Securities, said intermediate
services that generate fee-based income would be a focus for
mainland banks, which are trying to catch up with their foreign
counterparts in diversifying the income base from loans.
Compared with professional fund management companies, banks have
the advantage of an extensive network and a large customer base,
said Qiu Zhicheng, an analyst at Haitong Securities.
Zhao agreed, but warned of unequal competition with fund
management companies because of their size and reach. Banks could
be expected to concentrate on pushing their own fund management
products while neglecting those of the fund management companies,
he said.
"They cannot guarantee equality in promoting fund products,
though the problem has not appeared during the bullish fund market
in 2006," said Zhao. The SSE Fund Index saw an accumulated increase
of 148.82 percent in 2006.
The first trial batch of banks, including Bank of Communications
and China Construction Bank, currently manage 11 open-ended
funds.
(China Daily January 23, 2007)