Abstract: The joint-stock banks have surpassed the wealth management subsidiaries of the big banks in terms of scale, and the positions of bonds, deposits, and secondary market stocks on the asset side of the whole industry have fallen to a historical low
Text: Yan Qinwen
Editor|Hu Rongping, Yuan Man
The competitive landscape of the wealth management industry is continuing to diverge. In their annual reports, 16 listed banks disclosed the operating data of their wealth management subsidiaries (hereinafter referred to as "wealth management subsidiaries") in 2023. Among the 15 banks with comparable data for reference, 10 institutions showed negative growth in net profit, while in terms of product management scale, most of the large state-owned banks' wealth management subsidiaries declined, and the top three in terms of scale were occupied by the wealth management subsidiaries of joint-stock banks.
It is the annual report season of listed banks, and with the disclosure of the operation of their wealth management sub-branches, the changes that have taken place in the wealth management market in the past year are also showing - judging from the disclosed data, whether it is the shrinkage of some wealth management sub-scales or the decline in performance, it reflects the challenges experienced by the industry.
2. Wealth management sub-profits have shrunk
For bank wealth managers, the operating performance of the past year is not impressive.
China Merchants Bank, known as the "king of retail", mentioned in its annual report that the bank's asset management fees and commissions were 11.474 billion yuan, a year-on-year decrease of 7.89%, mainly due to the year-on-year decline in the average daily scale of CMB wealth management products.
Reflected in the profitability of the bank's wealth management subsidiary, it is the shrinkage of net profit. Among the 15 bank wealth management subsidiaries that can query relevant comparative data (statistical time as of April 10), 10 have shown negative net profit growth in the past year, of which 9 have experienced a double-digit year-on-year decline.
The year-on-year decline in wealth management of the two major state-owned banks was the most obvious, both of which were above 50%. Specifically, the net profit of ABC Wealth Management fell by 54.67% year-on-year to 1.597 billion yuan, ranking among the top three compared with the net profit in 2022, while CCB Wealth Management fell by 53.42% year-on-year to 1.323 billion yuan.
There is also a net profit "cut in half" is a wealth management subsidiary of a rural commercial bank - Chongqing Rural Commercial Wealth Management, whose net profit in 2023 will decline by 52.51% year-on-year to 170 million yuan.
In terms of overall ranking, CMB Wealth Management will still rank first in 2023, achieving a net profit of 3.190 billion yuan, but it will also decrease by 11.22% from the same period last year, while IB Wealth Management will rank second with a net profit of 2.582 billion yuan, down 17% year-on-year, and only CNCBI Wealth Management will increase its net profit among the top three.
However, there are still 5 wealth management companies that have achieved positive growth "against the trend". Among them, the net profit of the wealth management subsidiaries of the two joint-stock banks increased by more than 10% year-on-year: the net profit of Minsheng Wealth Management increased by 10.98% year-on-year to 1.152 billion yuan, and the net profit of CNCBI Wealth Management increased by 10.11% year-on-year to 2.255 billion yuan.
Behind the pressure on the net profit of wealth management is the downward trend of the industry's risk appetite. CICC pointed out that the changes in the product structure of wealth management companies will put pressure on the growth of wealth management sub-revenue and profit in 2023: the proportion of wealth management products with higher rates such as stock mix and medium and high wave fixed income+ will decrease, while the proportion of pure fixed income wealth management products with lower rates will increase.
At the same time, in order to enhance customer stickiness, the industry focused on reducing the rate last year, "in order to retain customers, a number of wealth management companies have preferential rates for some products, which will also affect the profitability." An asset management industry source mentioned.
3. The scale of the wealth management sub-scale of the joint-stock bank catches up
The decline in net profit was accompanied by a reduction in the scale of management.
From the perspective of the industry as a whole, affected by the "redemption wave" caused by the bond market shock at the end of 2022, the scale of bank wealth management will shrink in 2023, and it will be surpassed by public funds (with a scale of 27.69 trillion yuan) for the first time in the middle of the year, losing the throne of "asset management", which has attracted market attention.
At the end of 2023, the scale of bank wealth management has rebounded compared with the first half of the year, but it has not yet recovered to the level of the same period in 2022. According to the Annual Report on China's Banking Wealth Management Market (2023), as of the end of 2023, the scale of the bank wealth management market was 26.80 trillion yuan. Compared with 2022, the year-on-year decrease is 3.07%.
This is also reflected in the changes in the management scale of the wealth management subsidiaries of various banks last year. Among the 13 wealth management subsidiaries of banks that can query relevant data (as of April 10), nearly half of the wealth management sub-management sub-management scale has shrunk compared with the previous year, and most of them are wealth management subsidiaries of large state-owned banks with a relatively high scale before.
In 2023, the presence of the wealth management sub-shareholders of joint-stock banks will be further enhanced.
Historical data shows that at the end of 2021, two of the top three seats were occupied by the wealth management subsidiaries of large state-owned banks, namely CMB Wealth Management (2.78 trillion yuan), CCB Wealth Management (2.19 trillion yuan) and ICBC Wealth Management (2.02 trillion yuan). By the end of 2022, the top three included only one major state-owned bank, namely CMB Wealth Management (2.67 trillion yuan), IB Wealth Management (2.09 trillion yuan) and CCB Wealth Management (1.91 trillion yuan).
As of the end of 2023, the top three in terms of scale have been covered by the wealth management sub-subsidiaries of joint-stock banks: CMB Wealth Management ranked first with 2.55 trillion yuan of wealth management products, down 4.49% year-on-year, followed by IB Wealth Management with 2.26 trillion yuan, up 8.18% year-on-year, and CNCBI Wealth Management ranked third, with a year-on-year increase of 12.34% to 1.67 trillion yuan.
Although it failed to win the top three, the wealth management of large state-owned banks is still among the best, but most of them have further "slimmed down". Among them, CCB Wealth Management fell by about 21.55% year-on-year to 1.50 trillion yuan, ABC Wealth Management decreased by 10.61% year-on-year to 1.59 trillion yuan, ICBC Wealth Management decreased by 8.78% year-on-year to 1.61 trillion yuan, and Bank of China Wealth Management decreased by 7.39% year-on-year to 1.63 trillion yuan.
There are also some wealth management sub-management scales that have increased significantly. In addition to the above-mentioned CNCBI Wealth Management, three wealth management companies increased by double digits year-on-year - Ping An Wealth Management (1.01 trillion yuan), BOCOM Wealth Management (1.23 trillion yuan) and Everbright Wealth Management (1.31 trillion yuan), with a year-on-year increase of 14.20%, 13.45% and 10.73% respectively.
Zhou Yiqin, a senior financial policy expert, said that the product performance of the wealth management subsidiaries of some large state-owned banks is still a little behind that of joint-stock banks, and investors "vote with their feet" to choose asset management institutions with better product performance. At the same time, the customers of wealth management products of large state-owned banks are more middle-aged and elderly, and they are more sensitive to income fluctuations, and the risk appetite of such customers is lower.
According to Zeng Gang, director of the Shanghai Finance and Development Lab, the differentiation of scale is related to the strategies of different types of banks. As far as the traditional on-balance sheet credit business is concerned, joint-stock banks are facing certain bottlenecks in credit delivery, coupled with factors such as narrowing net interest margin and cost of capital, the momentum for on-balance sheet expansion has weakened, and they will focus on capital-light businesses such as wealth management. In this context, the joint-stock bank has given more independence to the wealth management sub-company in terms of overall strategy formulation and channel strategy, and objectively created a better environment for the development of the wealth management sub-bank in the bank.
"The investment ability of the wealth management sub-bank of the joint-stock bank is good, and there is more intra-industry cooperation and innovation on the sales side, which has effectively achieved a leap in scale. Zeng Gang said that the large state-owned banks have grown rapidly in credit in the past year, and they still have the momentum of expanding the scale of assets on the balance sheet. However, in order to achieve credit expansion, there will be certain attention and requirements for the deposit side, and there is a relationship between wealth management and deposits. However, from the perspective of on-balance sheet and off-balance sheet business, in terms of AUM (assets under management), large state-owned banks still have more advantages.
It is worth mentioning that, in the view of many industry insiders, inter-bank agency sales have become an important way for the wealth management subsidiaries of joint-stock banks to achieve the growth of management scale.
According to China's wealth management website, as of the end of 2023, a total of 491 institutions have sold wealth management products issued by wealth management companies, and the number of agencies has increased by 163 from the beginning of the year. "Inter-bank consignment sales have become the core direction of the growth of most wealth management sub-scales, and the sales model that strongly relies on the parent bank has gradually transformed into a sales structure with the parent bank consignment sales as the mainstay, and the inter-bank consignment sales and direct sales as the supplements. CICC pointed out in the research report.
In fact, a number of wealth management companies that have achieved positive growth in management scale have made more efforts in consignment sales. For example, according to the annual report of its parent bank, IB Wealth Management has developed more than 470 small and medium-sized bank agency cooperation institutions, covering more than 60 urban commercial banks and 390 rural credit institutions. Ping An Bank also mentioned in its annual report that Ping An Wealth Management has strengthened its agency sales cooperation with interbank banks, and by the end of 2023, it has cooperated with more than 40 interbank banks to carry out consignment business, with a balance of more than 340 billion yuan.
In contrast, the wealth management subordinates of large state-owned banks with outstanding channel advantages of the parent bank are relatively limited because of their high dependence on the parent bank. According to the Puyi Standard report, the number of products sold by other banks of state-owned wealth management companies as a whole accounts for only 22%, mainly because the number of distribution agencies that meet their requirements is relatively limited, the number of cooperative sales agencies is small, and they have not established in-depth cooperative relations with existing cooperative institutions.
However, as the only state-owned bank wealth management company that has increased its wealth management scale in 2023, BOCOM Wealth Management is also more active in expanding its off-bank agency sales. According to the annual report of Bank of Communications, the balance of off-bank consignment products at the end of the reporting period was 662.536 billion yuan, accounting for 53.80%.
4. The industry is differentiated, and investors seek stability
It has been nearly 5 years since the first wealth management subsidiary opened in 2019. During this period, the bank's wealth management sub-bank experienced the transformation and development of the new asset management regulations, and witnessed the adjustment of the stock and bond market, which continued to develop in the twists and turns.
In the eyes of industry insiders, the current challenges faced by the industry are also painful pains that bank wealth managers must experience in their growth.
"It takes time for customers to adapt to net worth, and bank wealth management is also in the early stage of business development, and many models are still being explored. The demand for investment in the residential sector has always existed, while the demand for investment in low-risk products remains strong, which is the strength of banks' wealth management. With the subsequent transformation of investors' thinking and more accurate perception of financial risks, in the long run, the scale and income of wealth management companies still have huge room for growth. Zeng Gang said.
CICC pointed out that under the neutral forecast, the scale of the wealth management industry will grow by 6% year-on-year in 2024, and the scale will be restored to 29 trillion yuan. Wealth management related business revenue is expected to increase by 4% year-on-year, of which the proportion of sales fee income may increase, mainly due to the strong rigidity of sales rates under inter-bank agency sales cooperation. In terms of sub-institutions, it is expected that the overall revenue growth rate of wealth management business will be faster for wealth management institutions with faster growth in scale.
Expanding consignment channels has a positive effect on wealth management companies to maintain their scale, but in the view of many industry insiders, "striking iron still needs its own hardness", and the essence of attracting customers lies in strengthening investment and research capabilities, product innovation and improving customer experience.
It is worth mentioning that in 2023, seeking stability will become the choice of most financial managers. CICC believes that wealth management institutions have generally reduced the scale of fixed income+ and equity mixed products and increased the supply of pure fixed income products, which is reflected in the asset allocation of additional allocation of deposit assets, while the positions of bonds/deposits/secondary market stocks have fallen to historical lows, and the fixed income + products of wealth management are "not too daring" to contain rights.
"If wealth management products have always been to cater to investors and a large number of low-volatility products, it will not be able to give full play to the advantages of bank wealth management multi-asset allocation, and it will be difficult to cope with the fierce competition in the future large asset management market at home and abroad; Puyi Standard pointed out in the report.