China Merchants Bank outlines wealth buildout plans

The Shenzhen-based group is expanding its presence in Hong Kong and has other overseas branches in the pipeline in Europe and the US, in a bid to sustain its rapid growth.
China Merchants Bank outlines wealth buildout plans

China Merchants Bank (CMB) has opened a wealth management centre in Hong Kong, offering a wider range of products and services than its other branches there, and it plans to base similar operations in London, Los Angeles, Luxembourg and Sydney. 

The Luxembourg and Sydney branches centres are expected to launch at the end of this year or early next and the other two will come in the next three years, said Wang Jing, general manager of private banking at a press conference yesterday. 

Shenzhen-based CMB, which operates China's largest private bank, is expanding fast in the wealth management segment, like its mainland peers. In the first half of this year, its private banking assets under management (AUM) grew 11% to $265 billion, with client numbers rising 10% to 64,000 in the same period. 

This came after that AUM swelled 24% to $239 billion last year, lifting it five places to 15th in consultancy Scorpio Partnership's latest ranking of the biggest private banks by global AUM, published this month (see chart below). CMB had only entered the top 25 in 2015, along with ICBC, while Bank of China did so last year.

Private banks ranked globally by AUM (click for larger view) 

CMB executive vice president Liu Jianjun said it was “a miracle” that the group had reached this point in just 10 years since setting up the private bank. It aims to become one of the 10 largest private banks globally, he added.

CMB's offshore assets include the proceeds from clients' sale of shares held in overseas markets, the cash balance from foreign trades, and investments made when China's foreign exchange policy was more relaxed, Liu said. In terms of the latter, he was referring to the strict capital controls that Beijing has imposed on outflows in the past couple of years.

Chinese clients also require services as a result of their overseas emigration and their children's studies overseas, Wang said. Moreover, wealthy Chinese will continue to invest more overseas over time, Liu said.

Of course, CMB faces strong competition from global private banks in overseas markets. Yet even the world's biggest private banks use external resources, noted Wang. Like they have done, CMB will build up its capabilities and select the best funds for clients, she noted.

Background to the new business

CMB started its first private banking service in Shenzhen in 2007, and started building its global private banking platform in Hong Kong in 2012 through its wholly-owned subsidiary in the city, Wing Lung Bank.

China Merchants Bank International Capital (CMBI), the group's investment bank unit, launched the second private banking platform in Hong Kong in 2016, serving clients whose companies have used CMBI for corporate services.

As of June 30, Wing Lung Bank had 5,000 PB clients with total AUM of $20 billion, while CMBI had about 600 PB clients with total AUM of $12 billion, Wang said.

The third outlet, the new private wealth management centre, falls under CMB's commercial bank in Hong Kong. Many of its clients use it as the custodian bank for their company listings, Wang said.

CMB’s Hong Kong branch currently has 290,000 clients with total deposits of HK$60 billion ($7.7 billion), but it has until only provided settlement and some basic services.

The new centre will offer products across insurance, equities, bonds, funds, structured products and derivatives, and services including wealth protection, wealth inheritance and family tax planning, said Chen Yixin, general manager of retail banking for Hong Kong.

The three Hong Kong private banking outlets have different target clients, so there is not much overlap, though there could be referrals, Wang said. For example, if a CMBI client needs family trust services, they might be referred to Wing Lung Bank, which has a trust licence, she said.

Besides Hong Kong, CMB also opened a private bank centre in Singapore in April, and one in New York in April last year.

CMB has set the threshold of investable assets of clients eligible for private bank services at Rmb10 million ($1.5 million).

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