What makes the deal unique is that Morgan Stanley has been able to buy 100% of the shares in a Chinese bank. And the reason is that Nan Tung is one of 11 so-called foreign-funded banks. In this case, it was owned by the Macau subsidiary of Bank of China (BOC), and was auctioned off as part of BOCÆs restructuring which included hiving off non-core businesses.
BOC appointed Deloitte late last year to hold an auction for Nan Tung. Around 100 invitation letters were sent out and Morgan Stanley was deemed the highest bidder.
Morgan Stanley gains a bank that was set up in 1985 and has a single branch (in Zhuhai) and 40 employees. However, the advantage of buying such a small bank is it is relatively easy to restructure. What is really key is that Morgan Stanley will get a commercial banking license.
If Morgan Stanley had sought one of these licenses via its own commercial banking entity it would have taken five years. The license means the US bank can now lend renminbi, make mortgage loans and do foreign exchange transactions. However, a separate license will be required to participate in the derivatives business.
Morgan Stanley will add its own staff and has already named ex-Citibanker, Tony Luo, as chairman.
The purchase price is undisclosed.