UBS closes in on sale of Credit Suisse’s China unit to Beijing state-backed fund

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UBS is in advanced talks to sell Credit Suisse’s China securities unit to a Beijing state-backed fund, in a blow to Ken Griffin’s Citadel Securities which had also bid for the company as it seeks to expand in China.

The Swiss bank is in discussions with Beijing State-Owned Assets Management, its mainland securities joint venture partner, according to two people with knowledge of the matter.

UBS would keep a minority stake in Credit Suisse Securities (China), which includes investment banking and brokerage services in mainland China, one of the people said. 

In a planned second step of the deal, UBS would seek to buy the Beijing fund’s 33 per cent stake in UBS Securities, its mainland securities business, after Chinese authorities introduced reforms enabling international banks to have full control of their mainland units.

The FT reported in January that Citadel Securities bid about Rmb2bn ($276mn) for Credit Suisse’s Chinese securities business, as the Miami-headquartered market-maker sought to expand in China even as geopolitical tensions rose. A person close to Citadel Securities said it was still keen to expand in the country even if its bid for the UBS unit did not succeed.

Ant Group, the Chinese fintech group founded by Jack Ma, had also bid for the UBS securities unit, a test of its ability to expand after a long-running crackdown from Beijing.

Bloomberg first reported UBS’s talks with Beijing State-Owned Assets Management. UBS and Citadel Securities declined to comment. Ant Group and the Beijing fund did not respond to requests to comment. 

UBS has to sell the Credit Suisse unit, which it took on when it bought its rival bank last year, because it cannot hold two licences for mainland Chinese securities units.

A transaction would require the agreement of Founder Securities, the Chinese joint venture partner that owns a 49 per cent stake in the Credit Suisse unit. UBS owns a 51 per cent stake.

Regulators have previously signalled they were keen for the unit to be sold to an overseas bidder, the FT reported in February, since the licence was originally issued to a foreign player.

Additional reporting by Chan Ho-him in Hong Kong