Citigroup Forms Chinese JV to Tap Local Capital Markets

Citigroup Inc (NYSE: C) has founded an investment banking joint venture in China, gaining access to fat returns from the country's booming capital markets.

The joint venture with Shanghai-based Orient Securities Co will allow the US banking giant to engage in equity and debt securities underwriting in mainland China, Citigroup said in a statement.

Citi Orient Securities Co, the joint venture with $126 million in registered capital, has secured nearly 50 initial public offering underwriting contracts at China's A share market, Citigroup Asia Pacific chief executive Stephen Bird said in an email to Dow Jones Newswires.

Citigroup holds a 33.3% stake in the joint venture, which is the upper limit for foreign ownership of an investment bank in China.

Citi Orient Securities Co will also offer consultation services for mergers and acquisitions in the energy, automobile and entertainment industries, according to Stephen Bird.

"I don't think we are a latecomer to the Chinese capital markets as investment banking in the country is a marathon rather than a sprint," Bird argued. "A decade from now, China's capital markets will be much larger and 2012 will be just the start of the rapid growth."

UBS AG (NYSE: UBS), JP Morgan Chase & Co (NYSE: JPM), Morgan Stanley (NYSE: MS), Credit Suisse Group AG (NYSE: CS), Goldman Sachs Group Inc (NYSE: GS) and Deutsche Bank AG already have joint ventures in China.

Bird said Citigroup will seek to increase its stake in the joint venture given regulatory approval and two years of successful operations.