Bank of Montreal is acquiring a 19.99-per-cent stake in China's Cofco Trust Co., a state-owned investment firm that manages $5.7-billion (U.S.) in assets.
Bank of Montreal is expanding further into wealth management in China, making its second acquisition in the region in just over a year as it courts rich investors in Asia.
The Toronto-based bank is acquiring a 19.99 per cent stake in Cofco Trust Co., a state-owned investment firm that manages $5.7-billion (U.S.) in assets.
It is the second wealth management deal in 13 months for BMO after the bank purchased Hong Kong-based Lloyd George Management, which manages about $6-billion in assets throughout Asia, in January last year.
BMO said in an announcement from Beijing on Monday that the Cofco acquisition is part of a broader plan to expand its wealth management capabilities in Asia. Foreign banks are permitted to partner with local financial institutions in China, but are prevented from owning more than 19.99 per cent of any operation.
As banks around the world seek to expand their wealth management businesses, which cater to investment funds and upscale clients with considerable assets, they are increasingly turning to Asia where a growing middle class is looking to invest more of its money globally.
Gilles Ouellette, head of BMO's Chinese operations, said BMO and Cofco have worked together before. "We have a decades-long relationship with Cofco Group through our role in financing Canadian wheat sales to China," Mr. Ouellette said in a statement.
"As we looked to expand BMO's offering to high net worth and institutional clients in China through a local partner, Cofco Trust emerged as the perfect choice."
BMO said it plans to assist Cofco with capital markets expertise, while gaining a bigger foothold on mainland China. The trust is a small firm with about 60 employees.
Wu Xiaohui, head of Cofco's parent company, state-owned Cofco Group, said the trust business in China holds "great promise."
"This strategic transaction between Cofco Group and BMO is an important step to enhance our involvement in the financial industry," he said in a statement.
BMO did not disclose terms of the deal, which must be approved by regulators in Canada and China.
The deal comes after Toronto-based Bank of Nova Scotia expanded in China in September, buying slightly less than a 20-per-cent stake in Bank of Guangzhou, a government-owned lender in one of China's fastest growing economic regions.
That acquisition, which saw Scotiabank pay $719-million to partner with the Chinese retail bank, is one of the largest investments by a foreign company in a Chinese bank since the global financial crisis hit in 2007.
Scotiabank's acquisition has not yet closed. During a trip to China this month, Prime Minister Stephen Harper said he spoke to Chinese leaders about removing any hurdles that stand in the way of Canadian deals gaining regulatory approval in the country. However, Mr. Harper did not name specific Canadian transactions that were potentially facing difficulty getting completed in China. Scotiabank officials said the bank wasn't aware of any problems with its deal not closing on schedule, later this year.
Scotiabank also has a 14.8-per-cent stake in Xi'an City Commercial Bank, which it bought in 2009 for $162-million, and holds a 33-per-cent stake in a joint-venture fund management company with Bank of Beijing.
Scotiabank is looking to tap into the increasing population in China that is looking to invest and borrow from a global bank, and Bank of Guangzhou is based in a city with a population of more than 10-million people, making it the nation's third biggest, behind Shanghai and Beijing.