Jan 22, 2019 (China Knowledge) - Citic Securities Co., the Chinese investment banking unit of investment company CITIC Group, yesterday, answered an enquiry from Shanghai Stock Exchange (SSE) about the acquisition of Guangzhou Securities, a BBB rating broker. CITIC announced its plan to acquire Guangzhou Securities for USD 2 billion in December, last year. The company’s stance was that the overall impact of the acquisition on CITIC's brokerages is controllable.
The CITIC Securities can significantly enhance its competitiveness in Guangdong Province and South China through this transaction as it plans to position Guangzhou Securities as its subsidiary in South China. Its business areas mainly cover Guangdong (except Shenzhen), Guangxi Zhuang Autonomous Region, Hainan, Yunnan and Guizhou.
The company believes that there is a space for development of securities’ business in Guangdong Province. Guangzhou Securities has a certain competitive advantage in the distribution of business outlets in that area which may help the growth of CITIC securities.
Compared with Guangzhou Securities, CITIC Securities only possesses 21 business outlets in South China, including 4 branches; while the former owns 42 business outlets, including 6 branches. After this acquisition, the total number of CITIC Securities business outlets in Guangdong (excluding Shenzhen) will increase from 18 to 50, which is expected to enter the first echelon of brokerage business in Guangdong.
Guangzhou Securities is also attractive in terms of revenue for CITIC Securities. Its 42 business outlets contributed a total of RMB 705 mln in the first half of the year, making 88% of the total income of Guangzhou Securities. However, the net profit of Guangzhou Securities decreased in recent years, due to national macroeconomic policy, securities market trend, insufficient project reserves and weak risk control.
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