China Merchants' explosive private-banking growth sets up global expansion push
Surge in assets under management at wealth operation this year buoys hopes for international expansion targeting Chinese customers abroad
Assets under management at China Merchants Bank's private bank soared by more than 200 billion yuan in the first five months of this year as it gears up for one of the first major global expansions of a mainland-based private wealth manager.
The private bank's assets under management jumped from 752.6 billion yuan (HK$940.4 billion) at the end of last year to about 970 billion yuan in May, up about 29 per cent in just five months, Cai Canhuang, a senior vice-president at China Merchants Bank, told the .
Aggressive investment in the mainland stock market over that period played a major role in driving the growth in the bank's wealth management operations.
"It wasn't all from stocks but that was a big part," Cai said on the sidelines of the Private Banker International Greater China Awards in Hong Kong last week.
Over the same period, the Shanghai Composite Index rose by about 50 per cent.
The private bank is setting out on a major global expansion that will eventually pit the eight-year-old operation against some of the world's most storied private banking institutions.
Merchants Bank's private bank opened its first official operations in Hong Kong last month, although it has for years maintained a wealth management business in the city via Wing Lung Bank, the local bank it took over in 2008.
Cai said the private bank would open a branch in Singapore by the end of the year and was on the hunt for merger and acquisition targets in Europe.
"We are looking for this kind of opportunity, especially at Swiss banks," he said, giving a long list of cities where the bank planned to open branches, including London, Luxembourg, Vancouver and Sydney.
Private banking on the mainland is about as old as China Merchants Bank's operations. The private bank was among the first to launch on the mainland, starting in August 2007 with 3,407 customers and 63.4 billion yuan under management.
The domestic market has since grown rapidly. At the end of last year the bank had 32,880 customers with more than 10 million yuan under management, or 29 per cent year-on-year growth, according to Merchants Bank's most recent annual report.
Our goal is very clear here: we just want to do the Chinese customers
China Construction Bank leads the market in the number of private banking customers with 274,900 at the end of last year, it said in its annual report. It does not publish assets under management but said those assets grew by about 18 per cent last year.
Merchants Bank, the mainland's sixth-largest commercial bank and largest joint-stock bank by assets, has a larger private banking operation than both Bank of China and Agricultural Bank of China, which tower over it in terms of total assets.
While competition among those banks in the domestic market is fierce, limiting regulation and underdeveloped capital markets have kept most global private banks offshore. From bases in Hong Kong and Singapore, they have sought to bank the mainland's wealth as it flows offshore.
The number of Chinese people with more than US$30 million in investable assets is expected to grow by 80 per cent between 2013 and 2023, by far the highest rate in the world, according to a 2014 report from Knight Frank.
Banks such as China Merchants might not be satisfied with simply managing the mainland's domestic wealth. Its expansion abroad will aim at bringing Chinese customers, whether in Asia or in Europe, back under the wing of a domestic bank.
"Our goal is very clear here: we just want to do the Chinese customers," Cai said.
The mainland's private banks would have their work cut out for them in the global market, Cai admitted.
About 90 per cent of Merchants Bank's private assets under management were based on the mainland, he said, and the bank had relatively little experience managing wealth across markets and under different regulators. Much of the experience would be gained in Hong Kong.
"Hong Kong is the most important city for China in this industry," he said.
