UBS will look to significantly boost its underwriting income in mainland China on the high fee tech board, Star Market, in a move to offset the effects of a ban on sponsoring IPOs in Hong Kong.
Beijing-based UBS Securities, the largest foreign-controlled investment bank in China, is expected to boost the share of fees generated from Star Market IPOs to 20 percent of overall mainland underwriting income, according to a «Bloomberg» report, citing unnamed sources. The figure could reach 50 percent by next year with two offering underway that could raise up to 3 billion yuan ($420 million).
«The fees are lucrative,» said Liu Wencheng, investment banking co-head of UBS Securities, without specifically commenting on the firm’s Star Market plans. «We are actively mobilizing resources to dig and cultivate high-quality tech-innovation companies to tap the opportunity.»
Whilst fees range between 1.5 to 2 percent for Hong Kong-based listings, investment banks can charge an average of 7 percent on the Shanghai tech board. A unique rule also requires sponsors to co-invest 2-5 percent of the shares issued and UBS is currently seeking special approval to use the Qualified Foreign Institutional Investors (QFII) program for additional capital, sources added.
Greater China Woes
Earlier this year, UBS was fined $13 million by Hong Kong regulators for due diligence failures and was additionally imposed with a 12-month ban from sponsoring IPOs. According to Bloomberg data, UBS underwrote $317 million worth of IPOs in Hong Kong in 2019, compared to $1.6 billion last year.
Its overall mainland investment banking revenue at UBS fell 48 percent year-on-year due to a decrease in large-sized deals. In 2019, UBS Securities has thus far underwritten listing that totaled $98 million.
