JPMorgan Steps Aside From China Deal, Fearing Regulatory Scrutiny

JPMorganJoe Mabel [CC BY-SA 3.0], via Wikimedia Commons

JPMorgan Chase & Co. (NYSE:JPM) has stepped aside on a Chinese firm’s initial public offering amid investigations by U.S. regulators into its hiring practices in China.

The bank’s latest move to pull out from Tianhe Chemicals’ IPO follows its decision to exit from two more deals earlier.

Probe into JPMorgan’s hiring practice in China

As reported earlier, US and foreign authorities have escalated probes into whether JPMorgan Chase & Co. (NYSE:JPM)’s hiring practices in China and Hong Kong violated anti-bribery laws. The probe centers on whether JPMorgan hired the relatives of powerful Chinese officials and businessmen in order to win business.

Amid the concerns over the regulatory probe, JPMorgan Chase & Co. (NYSE:JPM) ceded work on the IPO of Tianhe Chemicals, a privately owned maker of specialty chemicals. It was one of the two banks with Morgan Stanley (NYSE:MS) handling Tianhe Chemicals planned 2011 IPO in London, which didn’t get off the ground. Tianhe is now considering listing in Hong Kong this year in a deal that could raise $1 billion.

As Tianhe Chairman Qi Wei’s daughter, Joyce Wei, had worked for JPMorgan Chase & Co. (NYSE:JPM), the bank wanted to avoid being accused of getting the business through her connections, though the bank started handling the IPO before her joining.

JPMorgan’s withdrawals from other deals

JPMorgan Chase & Co. (NYSE:JPM) earlier withdrew from a syndicate of underwriters working on a $3 billion listing by China Everbright Bank Co., Ltd (SHA:601818) (HKG:0165).

According to media reports in August, JPMorgan Chase & Co. (NYSE:JPM) is being investigated over its hiring of the son of Tang Shuangning, a former banking regulator who is now chairman of the state-run financial conglomerate Everbright Group.

China Everbright Bank raised $3.2 billion in December in Hong Kong’s biggest IPO last year. Its lead underwriters were China International Capital Corp, UBS AG (NYSE:UBS), Morgan Stanley (NYSE:MS) and China Everbright Bank Co., Ltd (SHA:601818) (HKG:0165), the securities arm of the China Everbright Group.

According to people familiar with the development, the big Wall Street bank, JPMorgan Chase & Co. (NYSE:JPM), has also decided not to bid for a role in the $1.5 billion Hong Kong IPO of Chinese state-owned train maker China CNR Corporation Limited (SHA:601299) slated for listing in second quarter this year.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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