US investment bank, JPMorgan Chase & Co.(NYSE:JPM) announced Wednesday that it will be buying a 19.9% stake in the Chinese trust firm, Bridge Trust Co, according to media sources.
Bridge Trust Co is owned in majority by the state controlled company China Power Investment Financial Co. Bridge Trust Co is based out of Zhengzhou, China. Although the deal did not say anything about the value of acquisition, the deal must first be approved by the China Banking Regulatory Commission.
The interesting part here is that foreign companies are only allowed to invest up to 20% in China’s trust companies. JP Morgan’s 19.9% stake could come under fire from the government which could lead to a block of the bought stake.
JP Morgan said in a separate statement that they plan on helping Bridge Trust Co. build more resources and lure in wealthier people. The firm has a growing presence, especially with wealthy investors but there is a lack of products that cater to the wealthy. That is where JP Morgan comes in. JP Morgan has a lot of wealthy investors and definitely knows how to “woo” them and sell products that are popular with the wealthy.
This is a good opportunity for JP Morgan to expand their brand and influence in China. As the Chinese economy grows, more people get wealthy. As more people get wealthy, they look for places to store their money that are safe, reliable and will give them a return on their money. JP Morgan saw the growing demand for wealthy financial services in a growing economic country and decided to get in a piece of the action.
Since 2008, it appears that JP Morgan is taking a more central role and active role among the investment banks of Wall Street. Goldman Sachs appears to be cutting costs and trying to be a leaner bank, just as Morgan Stanley has done. JP Morgan has done the opposite; they have been opening new markets, getting into new areas and trying to have a more, expanded global presence.
This could give us a hint that 2008 strengthened JP Morgan while it took a heavier toll on the other banks, who are trying to stay more financially fit in the wake of the last financial disaster. Whatever the case may be, JP Morgan is a outperformer in the banking sector and will continue to be for some time to come.