Haitong in high spirits for growth

Luiz Luna Vaz's 19-year career at Portuguese bank Banco Espirito Santo experienced a dramatic change in 2015 when the bank's investment banking arm was acquired by Chinese securities company Haitong.

The new changes brought great opportunities for Luna Vaz, who was appointed to head Banco Espirito Santo's UK subsidiary in 2010, and has since become chairman of Haitong Bank UK.

Sitting in the company's grand offices with its 120 employees inside the London Stock Exchange building, Luna Vaz sets out his ambitious plans for Haitong UK, which is to compete head to head with the UK operations of Japan's Nomura, Jefferies from the US, Canada's RBC and Australia's Macquarie.

He says one factor that made all those banks so big in London is their history. As investment banks with an established presence in their home markets, they became the bank of choice for their home clients as they expanded to London. For Haitong to grow to their level of competitiveness, it should become the bank of choice for Chinese firms in London.

Haitong Bank, the name created for Banco Espirito Santo's investment division after the acquisition, offers four major categories of services -investment banking, capital markets, structured finance and asset management. The new division is a fully owned subsidiary of Shanghai-based Haitong Securities, founded in 1988, which has become one of China's largest securities companies.

"In the UK, you have to be good at something. You cannot be average at everything. Here, you compete with the best players in the world. And the best clients in the world require the best thing," says Luna Vaz.

"We have the opportunity to present ourselves as the leading Chinese broker - that's something that sells. We are repositioning ourselves as the China go-to firm. Before, that was not possible. Now, if anyone wants to hear about China, we want them to think of us."

Haitong's European expansion fits into the trend of a new wave of Chinese financial firms gaining a foothold in Europe on the back of the continent's financial crisis.

Anbang Insurance Group has been buying Dutch and Belgian insurance and banking assets. The Industrial and Commercial Bank of China also bought a majority stake in Standard Bank's London-based trading and markets business last year.

Haitong's acquisition, for 379 million euros ($412 million), was well timed. In May 2014, the major shareholder of Banco Espirito Santo was disclosed to be in "serious financial condition" and accounting "irregularities" were found after an external audit was ordered by the Bank of Portugal.

The government of Portugal and Portugal's biggest bank, Caixa Geral de Depositos, refused assistance to the group. Longtime CEO Ricardo Salgado resigned in July 2014 under pressure from the Bank of Portugal.

The Portuguese government then took Banco Espirito Santo into its own hands and separated its toxic assets from its nontoxic assets. Nontoxic assets were divided into commercial banking and investment banking operations. Selling off the investment banking operations to Haitong generated revenue for the commercial arm to operate, and also allowed the assets to fit into Haitong's rapidly expanding overseas activities.

"The profile of the investment bank assets fitted perfectly into the international strategy of Haitong," Luna Vaz says. Banco Espirito Santo's investment banking activities were already rather international, covering areas including Portugal, the UK, Poland, Brazil, India and the US state of New York, and all these footholds were transferred to Haitong in the acquisition.

The bank's existing licenses to operate across those financial markets also were transferred to Haitong, which is a more efficient and quicker way for Haitong to gain licenses rather than applying for them itself.

Already some of Haitong Bank's activities are taking on a Chinese flavor. Its research reports, for example, have added information on how sectors would perform based on influence from the Chinese economy and sector performance. Its staff members are also selling to clients English translations for Chinese stock analysis reports that Haitong has produced in China.

(China Daily Africa Weekly 01/22/2016 page30)