Levin Zhu, chief executive of China International Capital Corporation (CICC), has resigned from the investment bank after 16 years, casting a pall over the bank’s Hong Kong IPO plans.
Zhu, son of former Chinese Premier Zhu Rongji, had earlier told colleagues and clients he would like to leave the company and his request was approved by the board on Tuesday, according to two people close to the company.
“I have been writing this email for a long time and have complex feelings now,” said Zhu, in an internal farewell email seen by FinanceAsia. He added that he would pass the torch to a succession management team for the benefit of the company’s long-term sustainable development.
CICC announced Zhu’s departure in a statement on Tuesday.
Lin Shoukang, chief operating officer, will become acting chairman of the management committee and chief executive, according to a statement from the bank.
It is not clear where Zhu is going but the Securities Times, a Chinese newspaper, said he would probably set up his own company for internet-related businesses. The newspaper earlier broke the news of Zhu’s move.
Zhu’s departure puts further pressure on CICC’s proposed Hong Kong listing with market concerns about its management restructuring. The bank has mandated Agricultural Bank of China and itself as sponsors on its IPO of $600 million, sources told FinanceAsia.
The IPO may be at stake as a batch of senior management left the bank recently. In May, its former co-head of investment banking Jiang Guorong left for UBS to help run the Swiss bank’s Chinese IB business. It later lost its co-head of international investment banking Marshall Nicholson and chief economist Peng Wensheng.
“Important changes in a company’s management will definitely raise many questions in investors on stability of its businesses,” said a senior investment banker with a global bank. “Especially when such an icon leaves the company in which he has huge influence at a critical timing,” said the banker.
CICC originally planned to complete the deal by year-end but has not officially filed its listing application because it is still waiting for mainland regulatory permission. This means its target timeframe would be less possible to be realised, according to the people.
Zhu, a 57-year old capital market veteran, joined CICC’s Hong Kong office in 1998. Prior to CICC, Zhu worked for Arthur Andersen and Credit Suisse First Boston.
Under his leadership, CICC said in its statement, the bank had established a full-service investment bank business, consisting of three major business segments: investment banking, sales and trading and asset management.
Its network includes Mainland China, New York, London, Singapore and Hong Kong, the company added.
Meanwhile, Lin joined CICC in 2000 and acted as head of capital markets and chief operating officer. Before CICC, he worked for the IMF, Hong Kong Monetary Authority, DMG & Partners Securities as well as China Cinda Asset Management.
Zhu has remained low-key in media and was very serious in business and even dealt with detailed work of some big clients' transactions, said a person familiar with the situation.
During Zhu’s tenure, CICC played an important role in most state-owned companies including China Telecom, Sinopec, China National Petroleum Corp, China Unicom, China Life, China Construction Bank, Agricultural Bank of China and PICC.
However, some do not think Zhu’s move will damage the bank. “We haven’t seen any substantial impact of Zhu’s leave on the IPO. From the regulatory perspective, this is not a problem because it’s a move by a single person not the whole management team,” said a banker close to the transaction.
“CICC is such a big company with established business lines that will not be easily impacted by change of the chief,” said the banker.
Transforming Chinese brokers
Zhu leaves CICC at a time that Chinese banks are transforming amid intensifying competition. With China’s postpone of the A-share IPO market, the lukewarm appetite to Chinese listings in overseas markets during the last two years, as well as the lower expectation in China’s economic growth, Chinese securities houses are adjusting strategies to diversify businesses and expand market shares.
Some rivals of CICC, such as Citic Securities, China Galaxy Securities and Haitong Securities, have listed in Hong Kong and/or the mainland, which offers them more channels to boost their capital. The banks have also develop their brokerage networks to attract retail business.
Comparably, CICC’s focus on traditional businesses such as jumbo IPOs by big SOEs has lost some steam and the lack of balance sheet made it lose opportunities to develop new businesses.
The bank was China’s largest investment bank until 2011, in terms of volume of deals underwritten, and ranked 11th during the past year, as of May, according to Dealogic data. In the first nine months this year, it ranked sixth in announced M&A deals league table and seventh in terms of DCM deal volume, Dealogic said.
CICC was established by Morgan Stanley and China Construction Bank in 1995 as the country's first joint venture securities house. Morgan Stanley later exited the JV by selling its stake to a batch of foreign investors including private equity firm KKR and TPG and sovereign wealth fund GIC.