Wealth Management Connect: lenders vying for US$700 million a year in fees in Greater Bay Area, Bank of China executive says

Wealth Management Connect is the banking sector’s ‘next big driving force’ for fee-based income, says BOC Hong Kong executive Arnold Chow
Bank of China’s combined branch network of almost 1,100 – the widest in Greater Bay Area – gives the group an edge in tapping the scheme benefits

Banking & finance

Enoch Yiu

Published: 8:30am, 19 Jul 2021

Why you can trust SCMP

The upcoming Wealth Management Connect will generate US$700 million in fee-based income a year for banks in Hong Kong and mainland China, making it the “next driving force” for the industry in the Greater Bay Area, according to Bank of China Hong Kong (BOCHK).

The initiative will bring in a wide range of income, such as trading fees from selling investment products for clients, income from converting yuan into Hong Kong dollars and other currencies and charges for transferring money across the border, said Arnold Chow, deputy general manager for personal digital banking product department.

“According to our clients’ response, we found both mainland and Hong Kong investors have great interest to invest in the Wealth Management Connect scheme,” Chow said during a media briefing last week. “We expect the plan will be popular and it will be the next driving force for fee income for the banking sector.”

BOCHK and its rivals HSBC, Standard Chartered, Bank of East Asia and other lenders are eyeing new income sources from the scheme to bolster income amid pressure from decades of low-interest rate environment.

Beijing unveiled the cross-border wealth management link a year ago, which will allow Hong Kong and Macau residents to buy mainland investment products sold by banks in the Greater Bay Area. Likewise, residents of the nine cities in southern Guangdong province will also be allowed to buy investment products sold by banks in Hong Kong and Macau.

Chief Executive Carrie Lam Cheng Yuet-ngor said last week the scheme will be rolled out soon. Authorities on both sides of the border have set an aggregate quota of 300 billion yuan (US$46.5 billion) in fund movement in both directions. Each individual investor can invest up to one million yuan.

BOCHK will team up with its parent Bank of China (BOC) to take part in the connect scheme and hopes to become the top player by leveraging its branch network to its advantage, Chow said. BOCHK has almost 200 branches in Hong Kong, the most in the city while BOC has about 860 branches in the nine bay area cities.

“With over 1,000 branches in the Greater Bay Area, BOCHK and BOC have the largest network while customers will find it very convenient to go to a branch nearby to buy investment products once the new connect scheme is rolled out,” Chow said.

While HSBC and Standard Chartered have big branch networks in Hong Kong, the number of branches and customer base in the mainland Chinese cities are far less compared to BOC, said Louis Tse Ming-kwong, managing director of Wealthy Securities.

10:01

Hong Kong can't miss Greater Bay Area boat in post-Covid-19 recovery, Victor Fung of Fung Group says

The other Chinese banks also have huge branch networks in the mainland cities but they have a smaller presence in Hong Kong, which means the BOC Group is among the few banks with a big network on both sides of the border, he added.

“It appears BOCHK and its parent BOC working together are likely to be the big winners in the Wealth Management Connect scheme,” Tse said.

Chow said its Hong Kong clients are interested in mainland investment products which could deliver annual returns of between 3 and 5 per cent per year. Mainland residents are also keen to invest in Hong Kong investment fund products to diversify their risks and achieve higher returns, he added.

Chow expects the bank’s mutual funds, bonds and environment, social and governance-themed funds to be popular. Hong Kong has about 300 investment funds qualified to be sold to mainland investors.

Amundi is also keen on tapping opportunities arising from the Wealth Management Connect scheme and growing interest in ESG funds, said Zhong Xiaofeng, the asset manager’s chairman for Greater China. Europe’s largest money manager is aiming to boost its Asian assets under management to nearly US$600 billion by 2025.

Post