China's Haitong plans big expansion overseas

China's Haitong Securities plans to hire hundreds of bankers across Europe and the Americas to more than double the size of the Banco Espirito Santo de Investimento operation that it acquired last year.

Outlining plans to turn Haitong into "a world leading investment bank," Hiroki Miyazato, its deputy chief executive, said in an interview with the Financial Times that BESI was a "platform" for both organic growth and further acquisitions.

"We are studying the business models of other leading investment banks and they have 40 to 50 per cent [of revenues] coming from international [activities]," said Mr Miyazato, who was speaking at BESI's office inside the London Stock Exchange.

"We want to do the same to achieve that. We have a lot of things to do: Recruiting, products and investment," he said, explaining that even after the BESI takeover, Haitong would generate less than a 10th of its revenues outside of China.

Haitong, China's second-largest brokerage with a $42bn market capitalisation, agreed in December to pay €379m to buy BESI from Novo Banco, the good bank created out of the wreckage of Portugal's failed Banco Espirito Santo last year.

Haitong is one of several Chinese groups to gain a foothold in the European financial services industry in recent months.

Anbang Insurance Group, the Chinese group that acquired New York's Waldorf Astoria hotel, has been buying Dutch and Belgian insurance and banking assets. In February, Industrial and Commercial Bank of China bought a majority stake in Standard Bank's London-based trading and markets business.

Haitong's overseas expansion plans echo that of several Japanese banks that have had limited success in breaking into the top-tier of global investment banks, despite spending millions of dollars on recruitment.

Nomura, which bought the European and Asian operations of Lehman Brothers following the collapse of the US bank in 2008, dropped its expensive expansion plans three years later following a sharp downturn in market trading, due to the eurozone crisis, as well as management missteps.

Mr Miyazato, a former Nikko Asset Management executive who was born in China but became a Japanese citizen after working there for two decades, said: "Either through organic growth or through acquisition if we are lucky [we would like] to build more product lines, more research-driven and more trading supported."

"We will try to build the business step-by-step," he said. "Our international business is about 8 per cent of the group and we want to double that in the medium term."

He said Haitong planned to build up its mergers and acquisitions advisory practice in Europe, the Americas and Africa to work with the growing number of Chinese clients seeking deals in those markets. It will also look to expand into European asset management and to expand in renminbi trading.

Mr Miyazato said there was "a huge opportunity" to raise capital for Chinese and other emerging markets clients by selling renminbi securities to yield-starved European investors.

"We want to bring more deals from emerging markets to London and to New York to cater for the requirement from investors who are seeking higher yield, considering the low interest rate environment here," he said.

BESI, which returned to a slight profit in the first quarter, was hit by the troubles of its Portuguese parent and lost about a sixth of its 850 employees in the past year, many of them in London where staff numbers fell from 150 to 90.

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