Investment and Banking Case Study

Morgan Stanley: Growth Strategies in the Chinese banking Sector

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Abstract:
Morgan Stanley, a global financial services firm’s major business segment included Institutional Securities, Retail Brokerage, Asset Management and Discover Financial Services. Morgan Stanley entered China by forming joint venture with China International Capital Corporation Ltd. in 1995. In October 2006 Morgan Stanley acquired 100% stake in China’s Nan Tung Bank to expand its footprint in the Chinese Commercial Banking Sector. The Nan Tung Bank which was founded in 1985, offered comprehensive set of commercial banking products like deposits, home mortgage loans, and foreign currency exchange and remittance services. But it mainly focused on foreign funded companies and residents of Hong Kong, Macau and Taiwan. Morgan Stanley did not have significant retail banking capabilities and the penetration of Nan Tung Bank in terms of domestic corporate and retail accounts was nearly zero. Still, the acquisition made Morgan Stanley a promising participant in rising Chinese banking sector.

In China, Morgan Stanley faced stiff competition from Citigroup which had acquired 85.6% stake in Guangdong Development Bank for 24.267 billion Yuan (US$3.06 billion) in November 2006. Moreover China’s accession to WTO in 2001, promised opening of banking sector to overseas participation over a five year period and full liberalisation by December 11, 2006. This was expected to lead significant competition for Morgan Stanley from international banks. In such an increasing competitive scenario, would Morgan Stanley with acquisition of Nan Tung Bank be able to significantly mark its presence in commercial banking sector of China?

Pedagogical Objectives:

• To discuss the expansion strategies and the inorganic growth strategy
• To understand the influence of government policies in the Chinese banking sector
• To discuss the competitive strategies
• To analyse the growth prospects for Morgan Stanley in China.

Keywords : Morgan Stanley, Morgan Stanley in China, Merger and Acquisition, Joint Venture, Entry Level Strategy, Investment & Banking Case Study, Growth Strategy, China Banking Sector Reform, Nan Tung Bank, Foreign Banks in China, China international Capital Corporation Ltd., Commercial Banking sector of China