CMB reinforces leadership of China’s private wealth market
Wang Yanrong, general manager of private banking at China Merchants Bank, discussed the bank’s key initiatives and business performance in 2020 as well as the opportunities and challenges that it faces to establish market leadership
China Merchants Bank (CMB) is the seventh largest bank in China based on the latest Asian Banker 500 ranking of the largest banks in Asia Pacific. It is behind the six state-owned Chinese commercial banks,. However, it is the largest of the national joint-stock commercial banks and has the largest private banking business among all Chinese banks.
CMB started its private banking business in 2007. It now has over 155 private banking centres domestically and in seven overseas cities including the latest in London which was started in 2020.
Growing amid the challenges of COVID-19
Despite COVID-19 and a challenging year in 2020, the private banking and wealth management industry continues to do well as Chinese global financial markets rose unabated and hit record highs.
CMB’s assets under management (AUM) reached RMB 2.77 trillion ($432.9 billion) at the end of 2020, accounting for a leading 19% share of the RMB 14.56 trillion ($2.27 trillion) in private banking assets held by the top 12 largest Chinese-listed banks
The bank’s AUM grew a stunning 24.36% or RMB 543.6 billion ($84.95 billion) from the year before amid the COVID-19 pandemic, ahead of the 12 banks which collectively expanded by RMB 2.46 trillion ($384.45 billion) or 20.33%.
CMB’s private banking clients have the highest average AUM in the industry. In 2020, it grew its high net-worth individual (HNWI) client base by 22.41% to 99,977 with an average per capita AUM of RMB 27.75 million ($4.33 million).
Wang remarked, “CMB’s private banking registered an upward trend in 2020. Both the scale of client base and AUM grew by more than 20%, which was a new high in the recent four years”.
“The Chinese and many other mainstream stock markets grew positively in the last year. With CMB’s diversified allocation of the portfolio, the asset value of our clients also increased quite a lot in 2020,” she added.
The bank continued to enhance the priority and highly personalised services of private banking clients, giving them more choices and support in an all-around manner. As a response to the pandemic, it helped many clients with the challenges that they faced.
“For example, some of our clients found their children stranded in foreign countries, unable to come home and did not have enough personal protection equipment and related materials. We leveraged our global network to assist them, sending some urgently needed materials to those kids. That was a whole new challenge to us, which also helped to improve our ties with clients and establish a deeper appreciation of private banking privileges,” Wang elaborated.
As the world recovers from the pandemic, CMB has made relatively big improvements in its private banking customer acquisition, operation and digitalisation, with a focus on strengthening and deepening client relationships.
“The pandemic has stopped clients from coming to branches. Hence, to further cement customer acquisition, we took more initiatives to visit clients, worked together with our colleagues from the corporate banking department to acquire and communicate with clients,” said Wang.
Meanwhile, to maintain daily contact with clients, it encouraged more online communication and integration through the CMB App and other online service tools, instead of face-to-face interactions. Wang explained, “They can continue to feel the care from CMB and get the financial services that we provide, which also helped to improve client experience and acquisition efficiency”.
Expanding service and technology capabilities to add value to clients
Wang attributed the strength of the private banking business in part to the good performances of the markets in 2020. The capital market in particular has enabled CMB to add more value to clients’ portfolios. It also helped the bank achieve rapid development in other business capabilities such as family trust and discretionary asset management.
The bank continues to integrate financial and non-financial services by exploring more possibilities in the latter. For example, services to second generations of wealth owners through online education during the pandemic were improved. It included courses in understanding the capital market and helping them to adapt while studying abroad.
“At the same time we enhanced integration of operations in domestic and foreign markets, making better use of cross-border coordination in financial and non-financial sectors,” added Wang.
The bank continues to digitalise its private banking operations. More attention was given to working with fintechs to enhance client convenience and experience. During the pandemic, clients who had previously avoided or rejected online services and smart tools had no choice but to accept and adapt to the changes. The bank has therefore been able to move its advisory services on asset allocation as well as client communication with relationship managers and customised service teams online through mobile phones and smart devices. Clients could place orders through their phones.
“That was amazing to some clients, especially during the pandemic. The stickiness of the relationship between the bank and our clients was improved,” Wang emphasised.
More opportunities than challenges with opening of capital markets
According to the China Private Wealth Report published by CMB and Bain & Company, the number of HNWIs in China with more than RMB 10 million ($1.56 million) in investable assets reached 2.62 million in 2020, increasing by a compound average growth rate of 15% between 2018 and 2020. It is forecasted to hit 2.96 million by the end of 2021. The average investable assets of HNWIs in 2020 was RMB 32.09 million ($5.01 million), and the total invested wealth market is estimated to be worth RMB 84 trillion ($13.11 trillion).
The HNWIs are distributed widely from tier-one cities to peripheral areas. There are 17 provinces with more than 50,000 HNWIs and 24 provinces with more than 20,000 HNWIs in China.
The same report showed that the local banking sector commanded a huge 88% share of the private wealth market, with just 4% going to foreign banks. The remaining 8% of the market is served by a combination of asset/fund managers, securities companies, third party wealth managers and trust companies. The latter provides a wide range of financial, debt securities and wealth management services in addition to trust. It also plays an increasingly important role in family wealth management.
The ongoing reform and opening up of the country’s capital markets is expected to increase the sophistication of the wealth management industry. The entry and participation of more foreign institutions will add depth to the market and intensify competition among local players that have been dominant.
Wang believes it will bring more opportunities than challenges as she expects more market participants will bring positive influences and virtuous developments through additional capital and new capabilities.
“First, it will speed up massive wealth creation. Equity and capital market will make more people rich. Our statistics show that in 2020, total financing in the domestic A-share market and initial public offerings (IPOs) by Chinese companies in foreign stock markets grew significantly year-on-year. The listing of those companies is turning a whole group of entrepreneurs into potential private banking clients,” she explained.
In addition, Wang feels that the current focus on a “dual-circulation” economy which emphasises domestic consumption and innovation bodes well for wealth creation.
“In the past, wealth was created in old-fashioned service sectors or industries where profit needs time to grow. However, in the future, more and younger people, as they benefit from the new model of wealth creation, will get rich quicker. And rich people will become younger,” she opined.
She continued, “A consumption-driven economy is the best choice. All people can feel the convenience brought by economic development and find more opportunities. As private bankers, there is no doubt that we are in a golden age. We are also confident that CMB, after years of efforts, has built an outstanding business system, brand, and reputation among clients”.
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Region: East Asia