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Standard Chartered mulls JV opportunities in securities,virtual banking in China

Standard Chartered PLC is exploring expansion in China, including potential joint-venture opportunities in securities business and virtual banking, as the world's second-largest economy opens its financial sector to more foreign investors, said Benjamin Hung, the bank's regional CEO for Greater China and North Asia.

After the U.K. lender posted a 5% year-over-year decline in first-half net profit, Hung said in an earnings conference in Hong Kong Aug. 1 the lender would "actively pursue" and "invest strongly" in opportunities that support Chinese corporate outbound investments and facilitate inbound capital and investment flows.

"Whether we will be looking into securities units ...a joint venture for virtual bank, or partnerships with existing e-commerce players ... these are all options that we are exploring in terms of extending our business in China," Hung said.

Group CEO Bill Winters told China Daily in April the bank was looking at opportunities "to better present our capabilities in the securities industry in China." Winters also said the bank would be keen on establishing a digital bank in mainland China.

China started allowing foreign financial institutions to own majority stakes in their joint ventures in securities brokerages and asset managers in late April. Later, in July, the government said it would remove foreign ownership limits of securities, insurance and fund management firms in 2020, a year earlier than planned.

Beijing has been gradually opening the nation's financial sector to foreign players in recent years, as it had pledged to introduce more competition to the previously closed market. But still, foreign investors were holding only 1.6% of China's banking assets, according to a speech by the chairman of China Banking and Insurance Regulatory Commission in May.

In the three months ended June 30, Greater China and North Asia remained Standard Chartered's largest source of operating income. Operating income from this region, which also includes Japan and Korea, declined 1% year over year to US$3.1 billion. The lender's total operating income rose 1% to US$7.70 billion from US$7.65 billion a year earlier.

The bank said it is on track to achieve financial targets and to deliver a return on tangible equity above 10% by 2021. The bank's first-half return on tangible equity rose 88 basis points to 8.4% from 7.5% in the prior-year period. In the six months ended June 30, operating income from corporate and institutional banking, its largest business segment, rose 5% year over year to US$3.61 billion.

Chairman Jose Vinals said at the same conference the bank has completed three-fourths of its up to US$1 billion share buyback program as of June 30. The program would be completed "hopefully" by the end of the third quarter, he said.

Mary Huen, CEO of the bank's Hong Kong unit, added the ongoing political unrest in Hong Kong has not cause any "meaningful" impact on business or operations, and expected the issue to be resolved as soon as possible.

The ongoing disruptions in Hong Kong, in response to the now-suspended extradition bill legislation, is disrupting economic activity and presents a downside risk to growth forecasts for the Asian financial hub, Fitch Ratings said July 31.