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How China Merchants Bank conquered its competition

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China Merchants Bank is the primary bank in its market. Its success has been down to a long-term vision as much as a long-term perspective on its assets under management.

Shenzhen-based China Merchants Bank (CMB) made its first foray into private banking back in 2007, with the aim of growing the wealth of its existing high-net-worth (HNW) clients and their families at the same time as the bank expanded its physical footprint worldwide.

As of the end of June 2019, CMB had 137 private banking centres in 73 cities at home and abroad, including offices in Hong Kong, New York, Los Angeles, Luxembourg, Singapore and Sydney. A further office opened in London in 2019, adding another major financial centre to the bank’s domain.

Despite its global ambitions, CMB has concentrated on its core domestic market, where it is the leader in high-end private wealth management. At the end of June 2019, CMB private banking oversaw accounts for more than 78,000 clients and managed assets exceeding Rmb10 million, with aggregate assets under management (AUM) of around Rmb2.16 trillion.

By the end of June 2020, CMB’s private bank had total AUM of nearly 2.5 trillion yuan – the only private bank with more than 2 trillion. By that time the bank was operating more than 150 private banking centres across China, serving 91,000 clients.

The success of the bank has been well reported. In February 2020, CMB took top spot in the Euromoney Private Banking Survey for China, and won Asiamoney’s Best Private Bank in China award for the tenth time (and standing at seventh across Asia-Pacific), placing first in 15 sub-fields – up from last year, when it topped all 12 China categories.

A series of firsts

CMB launched its private banking arm in August 2007, when it was one of the first joint-stock commercial banks to do so. Since then, it has continued to innovate in private banking – being the first in China, for instance, to offer a global hotline service for clients to access their private banker and complete transactions from any location.

A continued focus for the bank has been the evolution of its family trust model, offering equity family trusts, staff incentive trusts and investment-right-reserved family trusts. The bank’s family office service saw its assets under management increase by 25% in 2019, and it has prioritized services around inheritance – establishing the Inheritance and Beyond Fortune Forum to encourage learning on young second-generation wealth and the Young Elites Association for individuals specifically aged between 25 and 35.

CMB boasts a complete wealth management business chain, covering all-round market research, its open product platform, advisory on asset allocation, discretionary investment management and several other related services. However, the bank stresses the importance of customer satisfaction and maximizing returns for clients rather than the sales volume of its products, hoping that the rising tide of its many customers’ wealth will lift its own ship most successfully.

Connecting China and the world

CMB and analysts Bain & Company have calculated that China is home to $28 trillion of private wealth, including about $13.2 billion in cash and deposits. The bank has noted that, in general, assets under management within China's private banks have been growing faster than in neighbouring markets.

To help clients allocate assets around the world, CMB has developed a broad open product platform that incorporates a wide range of products, including cash management/currency market, fixed income, equity, alternative and overseas investment.

Each CMB private banking client is offered an experienced private banker alongside an investment consultant team of specialists in various fields including securities, funds and insurance. As well as each banker’s personal experience and expertise, the bank relies upon a ‘global asset allocation system’ for HNWs, leaning on quantitative analysis of the global capital market and historical market data to offer customized asset allocation strategies for each client.

Focused on the future

With the ultimate impact of Covid-19 still emerging and the continuing unsettled nature of geopolitics threatening many asset classes, it has become more important and more difficult for private banks to continually grow the value of their customers’ wealth. CMB’s response is to continue to innovate.

Few banks are better positioned to succeed, and CMB is able to both point to its already established history of success and its ability to look further ahead for itself and its clients.

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