China Giant Edges Out Goldman as World’s Top Share Sale Arranger

beijingwalker · Oct 3, 2022

China Giant Edges Out Goldman as World’s Top Share Sale Arranger

Citic moves ahead of Wall Street titans in equity issues
China IPO volumes a bright spot in subdued year for listings

By David Morris
October 3, 2022 at 9:58 AM GMT+8

A surge in China’s initial public offerings propelled Citic Securities Co. to the top spot in the global league tables for equity issues, giving the state-backed brokerage a taste of global recognition.

Goldman Sachs Group Inc. fell to second place in the year to date, data compiled by Bloomberg show, marking the first time since 2009 that the number one position at the end of a quarter wasn’t held by either the US firm or its Wall Street rivals Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley.

The shift reflects China’s resilience amid a sharp downturn in listings elsewhere, as well as the difficulty international financial services firms have faced as they attempt to expand in the world’s second-biggest economy. Even as China reels from the impact of Covid Zero policy-driven lockdowns and a grinding property crisis, its capital markets have been a much-needed source of good news.

Companies raised $326.1 billion through global share sales in the year to Sept. 30, down 66% from the same period a year before, data compiled by Bloomberg show. In mainland China, however, equities raised $106.8 billion in the first three quarters, a decrease from the same period in 2021 of just 10.1%.

Citic Securities worked on four of this year’s 10 largest listings globally. It was the sponsor and lead underwriter of CNOOC Ltd.’s Shanghai share sale in April, raising 32.3 billion yuan ($4.5 billion) after US sanctions forced the state-owned energy giant’s delisting from the New York Stock Exchange. The firm also had a role on China Tourism Group Duty Free Corp.’s HK$18.4 billion ($2.3 billion) Hong Kong listing.

Global banks have struggled in China even after they were allowed to take control of their local joint ventures. With executives expressing concern over issues ranging from licenses to data security, the latest point of tension is pay, with regulators demanding Credit Suisse Group AG, Goldman Sachs and UBS Group AG give details on how they compensate top bankers, Bloomberg News has reported. Policymakers have also pressured China’s state-owned groups to reduce salaries and costs, with brokers including Citic and CSC Financial Co. slashing travel budgets for junior bankers and even senior directors.

China’s IPO pipeline remains promising, with seed and fertilizer giant Syngenta Group considering launching its 65 billion yuan IPO by the end of the year. Citic Securities is among the banks working on the deal. There are also the expected reforms to the country’s IPO system that could make it easier for companies to go public.

What Bloomberg Intelligence Says:
Citic Securities’ earnings in 2H could be sturdier than peers amid industry headwinds. Investment banking fee income at China’s largest equity and bond underwriter could benefit from a robust IPO pipeline, inclusion on the regulator’s “white list” and the anticipated rollout of the registration-based system for listings across all trading venues in mainland China. Drastic cost cuts aren’t needed, as adjusted revenue fell by only 6% in 1H, outperforming most large peers that have reported results.