Chinese private banks have been growing at a breakneck pace for the last few years, managing a compound annual growth rate of more than 20% between 2014 and 2016, according to research by Bain and China Merchants Bank. One private banker tells Asiamoney a new billionaire is created in the country every few days.
It is clear the opportunities are enormous.
Wealth management can have a fuzzy meaning in China. Government announcements concerning ‘offshore wealth management’ services often refer to a much broader definition of the term, closer to what would be called asset management elsewhere.
Those services have also come under fire, accused of being often little more than a way for Chinese investors to take risky short-term bets on the markets.
This is not the sort of wealth management that Asiamoney is concerned with in these awards. Instead, we concentrate on the important role wealth managers and private banks can play in helping their clients plan for the long term, diversify their risk profiles and handle the often thorny question of the transfer of wealth to the next generation.
Perhaps unsurprisingly, scale is a big challenge.
There are now more than 100,000 high net-worth investors in Guangdong, Jiangsu and Zhejiang provinces, according to Bain. There are 22,000 more in 22 other provinces across China. Smaller banks hoping to concentrate their teams in Beijing or Shanghai are going to miss out on many of those opportunities.
There is also the challenge of keeping up with a rapidly changing regulatory landscape.
China has made slow and steady progress opening its financial system for years. Under president Xi Jinping, that progress has accelerated. The regulatory overhaul increases opportunities for high net-worth investors, but it also makes risk management a bigger priority.
The stand-out wealth managers in the country overcame many hurdles during our awards period, marrying impressive reach with smart advice to make them an essential part of the firmament for the country’s most wealthy individuals.
China’s private banking sector might only be at the start of its development. But it is a strong start.
Overall best state-owned private bank: China Construction Bank Private Banking
China Construction Bank is not the first Chinese bank to provide private banking services in China, nor is it the bank with the largest customer base for these services. But it stands out for its performance in expanding its client numbers and their assets under management – both products of efforts to expand the bank’s network and improve services.
By the end of 2017, the number of private banking customers jumped nearly 17% year on year, to more than 110,000; assets under management also advanced 12.8%, to Rmb1.2 trillion ($189 billion).
What is even more impressive is CCB’s ability to win high net-worth private banking clients.
By the end of last year, the number of private banking customers entrusting assets worth Rmb10 million and above to the bank was up 15.2% on the year, to approach 67,700.
The total AuM brought by this group of customers was Rmb940 billion, a 20% increase on the year before.
Also, by year end, the number of what CCB labels “strategic private banking clients” – long-term, ultra-high net-worth clients – was up 28.6% from the year before, while the AuM the bank booked for these clients also advanced 25.1%.
These results were achieved thanks to CCB’s sustained efforts to expand its service network and strengthen servicing capability. The bank has established more than 330 private banking centres across China.
It has also combined the strength of its multiple affiliates in fund management, financial leasing, trusts, insurance, investment banking and futures brokerage in product development, while deploying digital technologies to upgrade marketing and services for private banking customers.
Overall best national private bank: China Citic Bank Private Banking
Citic Bank was one of the first Chinese banks to offer private banking services in China. It outperformed other domestic national commercial banks in growing its private banking customer base and assets under management in 2017 by upgrading its marketing and sales capability and developing new products.
By the end of the year, its number of private banking clients was up more than 30% year on year, to 28,275, and the AuM of its private banking division increased 25.3% to Rmb402.5 billion ($63.5 billion).
The rapid growth of its private banking business created a prime opportunity for the bank to generate more income from intermediary businesses. In 2017, its private banking customers paid more than Rmb1.6 billion in fees for product management and asset allocation services provided by its private banking division, a jump of 69% from a year earlier.
Last year, Citic Bank redesigned the management system for its private banking operations with the help of external consultants. The division also deployed big-data analysis to achieve precision in marketing and to spot other opportunities. That enabled the bank’s private bank team to boost income: they achieved more than Rmb2.2 trillion in product sales in 2017, up 68% from 2016.
Citic Bank is also a market leader offering fully entrusted asset management services for ultra-high net-worth private banking clients, who have over Rmb100 million. It says it has booked more than 100 such clients for these services in the last year.
Overall best regional private bank: Bank of Beijing Private Banking
Bank of Beijing was incorporated in the Chinese capital of Beijing in 1996. Since then, it has opened branches in 12 large Chinese cities, most of which are in northern and coastal China regions. It leads regional banks in the country in the provision of private banking services and continues to outperform its peers in product development and customer base expansion.
Bank of Beijing started offering private banking services in 2011 – the first regional bank to do so in China. Unlike state-owned banks and national commercial banks, it lacks both an extensive business network and large talent pools to tap into. Because of its limited resources, the bank has taken a focused approach to developing its customer base and products in a bid to build its competitive strength.
From the very beginning, the bank chose to target owners of successful startups and families whose businesses are still in the growth stage as clients.
To better serve these customers, its private banking team has focused on developing family trusts. Bank of Beijing rolled out the first batch of family trust products in 2013, making it an early pioneer of such products on the domestic market.
Bank of Beijing’s focused development strategy for private banking has paid off nicely. By the end of 2017, the number of private banking clients was up 30% over the year, to top 40,000.
Best private bank for inter-generational wealth transfer: Ping An Bank Private Banking
China didn’t allow private businesses until the early 1980s. As a result, the majority of private businesses are still in the hands of their founders and the concept of transferring wealth to the next generation is still fairly new to business owners.
|Bonnie Lam, Ping An|
Bank Private Bank
In 2013, Ping An joined Deloitte and the business school of Tsinghua University to create an award programme for private Chinese businesses with outstanding performance in inter-generational wealth transfer. In the last two years, the bank has also published whitepapers and run TV programmes to promote best practice.
Ping An is well positioned to help its clients with passing on their wealth by leveraging the resources and expertise of sister companies, including life insurance, trust companies and securities firms, within the wider group. It also has a capable staff, having hired many of the private banking team from global banks.
Best private bank for international network: Bank of China Private Banking
Bank of China opened private banking service centres at its Shanghai and Beijing branches in 2007. Operating in more than 40 countries and overseas regions, BoC has also built an extensive business network outside mainland China, which has enabled its private banking division to quickly expand its global footprint.
BoC’s private bank achieved another milestone in November 2017 when it opened a service centre in London, which allows the bank to better serve its private banking clients in Europe.
BoC has a longer history of operating overseas than most domestic banks; that has allowed it to form partnerships with a broad range of international banks, strengthening the bank’s ability to serve as a financial bridge between China and the rest of the world for its high net-worth clients.
Over the years, the bank has also collaborated with a slew of top-tier global professional service providers, including investment banks, insurance companies, trust firms, law firms, accountancies and advisory firms, to offer comprehensive as well as fully customized services for its private banking customers. Its general manager is Min Liu.
Best private bank for global investment exposure: Bank of China Private Banking
While continuing to expand its international private banking service network, Bank of China has made remarkable progress recently in rolling out new products and maximizing opportunities for its high net-worth clients to allocate assets around the world.
It is one of the first banks to launch products to allow its private banking customers to invest in preferred stocks, fund of funds (FOFs), high-yield bonds and real estate investment trusts that are traded on overseas markets.
BoC is uniquely positioned to create more opportunities for ultra-high net-worth clients to invest in overseas bond products that are denominated in renminbi. Its Hong Kong subsidiary, BoC International, has long been the largest underwriter of renminbi-denominated bonds in Hong Kong.
BoC is well placed to expand its product offerings to help high net-worth clients manage wealth on international markets by leveraging its extensive overseas business network and the expertise of its product teams in and outside China.
Best private bank for product development: Agricultural Bank of China Private Banking
With 215 private banking and wealth management centres operating across China and a team of nearly 2,000 professional managers, Agricultural Bank of China has developed a large wealth-management product portfolio for its high net-worth customers.
The bank’s private banking division made a timely adjustment in 2017 to its product development strategies to focus on equity products, products based on quantitative strategies, equity-bond hybrids and multi-strategy fund of funds.
Last year, the division also sped up the development of family trust products, including one based on customers’ insurance premiums. Earlier this year, it issued Green Diamond credit cards to offer more diversified as well as customized services to its high net-worth customers.
These efforts have produced positive results: by January 2018, ABC’s private banking division saw assets under management rise 16% year on year, to exceed Rmb1.1 trillion ($174 million), while customer numbers increased 15% from a year earlier, to roughly 106,000.
Best private bank for family offices: China Minsheng Bank Private Banking
Family offices are a fairly new territory in China’s private banking sector. China Minsheng Bank is one of the first to open family offices for ultra-high net-worth clients. Its deputy general manager is Li Wen.
While continuing to expand its range of services as well as the number of clients, the bank has stood out in the domestic private banking sector for its relentless efforts to standardize management and introduce best practices in family office services.
|Li Wen, China|
The creation of the China Minsheng Bank Family Charter symbolises that effort. The charter defines procedures for how the bank’s wealth managers engage customers and discover their needs.
For example, it spells out seven steps on how the bank’s managers should interact with potential clients to ensure a full understanding of their concerns and needs before creating family trusts.
The charter, which is also designed to install a fire wall between the assets of families and those of family-controlled businesses to prevent conflicts of interests, has also paved the way for the healthy growth of Minsheng’s family investment funds, creating more than 20 of them for large family-controlled companies since 2014.
It also leads domestic banks in developing family trust products such as charity and insurance premium trusts.
Best private bank for innovation in technology: China Construction Bank Private Banking
In recent years, China Construction Bank has made a consistent effort to deploy digitization and data analysis in private banking and wealth management to upgrade internal management processes and attract customers, which partly explains how the bank’s private banking division achieved such robust business growth last year.
In 2017, CCB installed an integrated online data management platform to enable its wealth managers to collect, share and analyze customer data and to allow its headquarters and branches to coordinate activities and track business performances.
The system also allows wealth managers to engage and interact with customers via mobile phones, computers and China’s messenger app WeChat.
The system has proved to useful for customer profiling and marketing. CCB did a remarkable job in winning new customers in 2017 by analyzing data collected through 41 scenarios created online to mimic real-life business activities.
CCB has also developed a plan to further digitize its private banking and wealth management operations by 2020.