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China Merchants Bank sees strong wealth unit growth as it expands overseas
June 23, 2017 / 11:37 AM / in 6 months

China Merchants Bank sees strong wealth unit growth as it expands overseas

* Sees private banking assets growing 20 pct annually over 5 years

* Plans new overseas offices in Sydney, Luxembourg next year

* Sees private banking revenue contribution at 20 pct in 5 years

By Julie Zhu and Sumeet Chatterjee

HONG KONG, June 23 (Reuters) - China Merchants Bank Co Ltd (CMB) expects its total private banking assets to grow 20 percent annually over the next five years, as it expands to countries seen as top investment destinations for the wealthy Chinese.

The increase in CMB’s private banking assets, however, will be slower than last year’s 33 percent rise to about 1.7 trillion yuan ($243 billion), as the pace of expansion in the overall market eases slightly amid sluggish growth in the world’s second-largest economy.

China is the biggest private wealth market in Asia Pacific and the second highest globally. Its number of high net worth individuals has risen nearly nine times since a decade ago, a private survey by CMB and consulting firm Bain & Co shows.

But many of the rich are increasingly looking overseas to diversify their investments and hedge against a weak domestic yuan currency and, according to the survey, the key destinations are Hong Kong, the United States, Australia and Canada.

CMB is planning to open new private banking offices in Sydney and Luxembourg next year, and Los Angeles, London and Vancouver over the next two-three years, Wang Jing,general manger of CMB’s private banking department told Reuters.

China’s sixth-largest lender by assets already has a private banking presence in Hong Kong, New York and Singapore.

“We look to serve Chinese clients when they go global and manage their assets worldwide,” Wang said, adding CMB’s strong banking relationship with onshore wealthy Chinese clients means it would be in a better position to tap and help manage their offshore investments than foreign wealth managers.

CMB has about 60,000 private banking clients with minimum investable assets of 10 million yuan each.

While the private banking units of Chinese lenders such as CMB and Industrial and Commercial Bank of China Ltd have benefited from the surge in onshore wealth, most global private banks have not been able to cash in as the country’s regulatory curbs, dominance of local banks and less developed capital market keep them away.

The international firms, instead, have chosen the offshore route to do business with the millionaires spawned by China’s booming technology sector and its surging stock market.

China saw total investable assets rising 47 percent in 2016 to 165 trillion yuan, the survey shows.

“We are quite optimistic about the prospect of China’s private wealth market,” Wang said.

A strong onshore wealth growth outlook means more staff will be required, on top of roughly 1,400 people CMB currently has globally for the private banking business, but the lack of experienced talent in China is a challenge, she said.

CMB’s private banking business raked in about 11 billion yuan in revenue last year, or nearly 11 percent of the bank’s retail banking revenue. Wang expects this contribution to grow to about 20 percent in the next five years.

$1 = 6.8390 Chinese yuan renminbi Reporting by Julie Zhu and Sumeet Chatterjee; Editing by Himani Sarkar

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