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China's top brokerage affirms global drive after CLSA exodus

Citic Securities chairman calls departures at Hong Kong unit a 'personal' matter

A woman walks past a sign outside Citic Securities' head office in Beijing. China's biggest brokerage has tried to make headway into overseas markets.   © Reuters

HONG KONG -- Citic Securities, China's largest brokerage by assets and revenue, remains committed to becoming a global finance industry player even after resignation of top executives at unit CLSA, which it bought as a vehicle for international expansion.

"The direction toward internationalization will not change," Zhang Youjun, chairman of Citic Securities, said on Friday at the company's annual earnings briefing.

Zhang acknowledged reports that Jonathan Slone, the long-serving CEO of the Hong Kong-based brokerage, had tendered his resignation on Wednesday to spend more time with his family.

Zhang also attributed the resignation of CLSA's Chairman Tang Zhenyi to personal reasons. But he denied the reported departure of Nigel Beattie, CLSA's chief operating officer, saying "he is still carrying out his responsibilities."

Zhang's account counters media reports that a cultural clash between the formerly French-owned Hong Kong unit and the Chinese state-owned conglomerate was behind the exodus of CLSA executives.

According to reports first published by Financial Times this week, tensions have existed ever since Citic Securities acquired CLSA from Credit Agricole in 2013 for $1.25 billion, and rift only grew deeper as the differences between Western investment bank culture and Beijing-style management widened.

Jonathan Slone, Hong Kong-based brokerage CLSA's outgoing CEO, speaks at an investors conference in 2016.   © Reuters

Zhang stressed Slone's departure owes to "personal considerations." Zhang said that he had "spent a long time urging him to stay," but that Slone will return to New York to be with his family after working for three decades at CLSA. Slone will remain as CEO for an unspecified period of time to "help select an appropriate successor together."

Zhang said "our largest asset is our people." Slone's and Tang's departure could trigger more resignations, which would deal a blow to Citic's pursuit of global competitiveness. The chairman is counting on the strength of CLSA's 2000-plus overseas staff to carry on its mission.

Citic Securities is an offshoot of Chinese state-owned investment company Citic Group, which was a direct product of reform and opening up led by Deng Xiaoping. Established in 1979 as a main vehicle for the Chinese government to procure funds from abroad to help foster growth at home, it has transformed into a conglomerate with stakes in banking, securities, investment, mining, engineering, manufacturing, real estate and other businesses.

Under the directive of the Ministry of Finance, it has helped spearhead China's globalization in recent years. Citic Securities' purchase of CLSA falls this strategy.

The Chinese brokerage's total revenue fell 10% to 51.06 billion yuan ($7.6 billion) last year, while net profit dropped 18% to 9.39 billion yuan. But Citic Securities continued to lead its domestic peers on both measures, as well as in stock and bond underwriting in 2018.

Though a national champion, its revenue from overseas operations amounts to little more than 10% of the total, while their contribution to the bottom line is "much lower," according to Zhang.

Even these levels would not have been possible without the CLSA acquisition five years ago, which Zhang described as a "completely accurate" decision. He praised the unit for carrying a "crucial and essential meaning for internationalization."

When asked by reporters whether Citic Securities was considering other deals to pursue its internationalization, Zhang said: "I have no plan whatsoever for making acquisitions at this point."

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