Indian commercial banks and Chinese insurance companies saw big gains in assets under management (AUM) in this year's AI300 ranking, more than making up for among Malaysian asset owners compared to last year's suvey.

The combined AUM for institutions in the middle bracket at the end of 2016 ended up at a total of $7.24 billion, up 1% from the total at the end of 2015, according to AI300 data.

There were seven Indian commercial banks in the middle tier of the AI300, and all of them saw their AUM rise in 2016. Punjab National Bank, ranked 128, enjoyed the most profound growth, with its AUM rising 20%.

Beyond that, HDFC Bank (number 133), saw its AUM increase by 14%, while that of Bank of Baroda (127th) rose by 12%. Meanwhile, Central Bank of India and Union Bank of India both jumped up from the bottom 100 institutions, and in total the overall AUM for Indian commercial banks in this bracket rose around 32% to $305.6 billion.

The total banking sector assets in India increased at a compound annual growth rate of 8.83% from 2013 to 2017, to $2.2 trillion, according to an October report by Indian Ministry of Commerce and Industry organisation India Brand Equity Foundation (IBEF). It attributed the growth in the banking industry to increasing savings and rising disposable income, greater access to the banking system, especially in rural areas, and healthy regulatory oversight by the Reserve Bank of India.

Gross national income per capita in India grew by around 83% between 2007 and 2016, according to World Bank data.

But while India's bank sector has enjoyed strong growth, it has come at part at the expense of mounting debts in the country's public banking sector. The latter has rapidly accumulated bad debt over the last several years, with non-performing assets growing by around 163% to Rs7.33 trillion ($112.05 billion) between March 2015 and June 2017, an October 24 press release by the Indian Ministry of Finance said.

The same release announced a bank recapitalisation programme with the aim of injecting Rs2.11 trillion into public sector banks over the next two years, partly to address the debt issue.   

Investors welcome this move to tackle bad debt, said Yerlan Syzdykov, French asset manager Amundi’s deputy head of global emerging markets and co-head of global emerging markets fixed income, after years of politically driven or murky credit hiding the inefficiencies of the country’s fiscal system.

“This is really good news from an Indian economy perspective,” Syzdykov (pictured left) told AsianInvestor. “Finally, after many, many years of investors banging on the doors of the central bank in India, we are seeing an attempt now to fix that problem of chronic NPLs (non-performing loans).”

China insurers spike

Chinese insurance companies in the 201 to 300 bracket also had a good year in 2016, increasing their AUM by a combined 23% to $198.4 billion.

Hexie Life Insurance’s AUM spiked dramatically, growing by 146% in 2016 and jumping from 249 in 2015 to 163 in 2016. Huaxia Life Insurance (126th) and Ping An Property and Casualty Insurance (170th), both grew their AUM as well, by 20% and 3% respectively. Funde Sino Life, the top-ranked Chinese insurance company in the middle bracket (107th), and China Taiping Insurance, which dropped into the middle bracket in 2016, were the only two in this sector to have shrinking AUM, seeing respective drops of 9% and 10%.

China accounted for around 47% of global insurance premium growth in 2016, with the country's life insurance market growing by over 30% alone year-on-year, a March report by German financial services firm Allianz SE said.

Life and health insurance premiums in China alone accounted for 57% of all emerging market life insurance premiums, a November 2016 report from Swiss insurance company Swiss Re said. It expects China to continue to drive life premium growth in emerging markets over the next few years, based on the Beijing-based government’s plan to grow insurance penetration to 5% by 2020, from 3% in 2014.

Malaysia's stalling momentum

In contrast to India and China, Malaysian asset owners took a hit in the middle AI300 category in 2016, with all four institutional investors in the bracket registering a decline in AUM.

Maybank (ranked 110), fell by around 2%; Khazanah Nasional  (155th), by around 4.5%; CIMB Bank (166th), by around 1%; and Pension Trust Fund (KWAP) (177th), by around 12%. Overall Malaysian AUM in this bracket was down around 16% in 2016.

The drops came at a time when the Malaysian economy registered 4.2% economic growth in 2016 versus 5% in 2015. Its GDP slowed amid low commodity prices, higher cost of living, soft employment conditions, and the underperformance of the ringgit, a March report by central bank Bank Negara Malaysia said.