Japanese bank on verge of buying Shanghai-based GE Capital Finance

TOKYO - Nomura Holdings Inc, Japan's largest investment bank, is set to buy a Chinese unit of GE Capital, the financial services unit of General Electric Co.

The acquisition would be a key step toward Nomura building a solid footing in the fast-growing financial markets of the Chinese mainland, according to a source with knowledge of the matter.

While Nomura has had a presence in the country for around three decades, it lacks the banking and securities licenses needed to offer services in the local currency and fully tap into the country's rapidly expanding economy.

The Japanese investment bank has reached an agreement to buy the Shanghai-based GE Capital Finance (China), according to the source, who spoke on condition of anonymity because the deal has yet to be approved by the regulators.

The investment bank would then apply to convert the Chinese financial company into a bank and seek licenses to provide various yuan-denominated services such as forex hedging solutions to Chinese exporters or international companies with operations in the country, the source said.

The deal was first reported by the Wall Street Journal. Nomura declined to comment and GE Capital could not immediately be reached for comment.

Nomura is also pursuing a securities joint-venture partner to allow the company to underwrite stock and bond transactions in the country, the source said.

That would allow Nomura to compete with rivals such as Goldman Sachs Group Inc and UBS AG, which already have ventures in operation in the country.

Underwriting securities in China is the long-coveted goal of non-Chinese investment banks, given the economy's future growth projections and fee potential.

Big profits at foreign banks in the country, however, have proved hard to grasp, because of several factors, including intense and growing competition from local competitors.

Nomura purchased the Asia and European businesses in 2008 of Lehman Brothers Holdings Inc following the collapse of the Wall Street bank.

That deal gave Nomura the opportunity to broadly strengthen its presence across Asia and the world through Lehman's investment banking division, among other units.

Nomura has been clear in stating that part of its planned expansion after the Lehman Brothers Holding's acquisition would focus on gaining more access and licenses in the country.

However, the GE deal and any other securities joint ventures Nomura pursues are at the mercy of China's regulators, namely the China Banking Regulatory Commission (CBRC).

The status of a CBRC approval for the Nomura-GE Capital deal, and the price of the offer, were not immediately clear.

Reuters

(China Daily 10/20/2011 page16)