The private banking arm of mainland-headquartered China Merchants Bank (CMB) remains on course to become one of the world's biggest private banks by assets under management.

That is the upshot of a survey published on May 20 that reinforces the importance of Asia as a source growth for the industry and dovetails with the bank's reported aim to become the largest private bank in Asia.

In the latest Scorpio Partnership ranking of private banks by global assets under management (AUM), CMB moved up two places to 13th compared with a previous list published nine months earlier (see table below).

Assets under management for the Chinese private bank hit $292 billion in 2017, up 22.55% from the previous year, according to the consultancy.

“CMB  has been leveraging on its strength to grow its AUM. At the rate they are growing, it is possible they could be in the top 10 three years down the road or even earlier,” Sean Kang, director of wealth management for Asia Pacific at Scorpio Partnership, told AsianInvestor.

CMB has come a long way since starting its first private banking service in Shenzhen in 2007; by 2012, it was building an offshore private banking platform in Hong Kong through wholly owned subsidiary Wing Lung Bank.

The bank has an overseas private bank presence with an office in New York, which it opened in April 2016, and in Singapore, which it opened in April 2017, as AsianInvestor reported previously.

“Apart from capitalising on the growth in wealth in China itself, Chinese private banks are also starting to expand throughout the rest of Asia, which is likely to provide a further leg-up to their asset growth,” noted Caroline Burkart, London-based director at Scorpio Partnership.

Private banks ranked globally by AUM
(Click for full view)

According to the World Wealth Report 2017 by CapGemini, the number of Chinese classified as high-net-worth individuals (HNWIs) grew by 9.1% to 1.1 million in 2016, when their collective wealth grew by 9.8% to $5.8 trillion.

With domestic Chinese wealthy clients increasingly seeking to diversify overseas, private banks have little choice but to follow the money, she told AsianInvestor.

Nevertheless, as these local giants move out of what is essentially a highly protected market and venture into foreign markets, they will come head-to-head with global players who have longevity in  managing wealth, boast a global reach and strong expertise, and offer a full range of investing capabilities.

“It will be interesting to see how that plays out,” Burkart said.

Other Chinese private banks are also expected to continue their upwards march in the global rankings.

ASIA DRIVING GROWTH

The presence of Chinese banks is not the only notable theme highlighted in the top-25 list of private banks. The other point worth noting is that many of the fastest-growing global private banks owe much of their growth to Asia.

“Asia remains a key growth driver for many of the large global private banks, such as UBS, Credit Suisse, JP Morgan and Julius Baer,” Kang said, adding that AUM growth in Asia for many of these private banks was much higher than global AUM growth.

Assets from Asia for Julius Baer in 2017, for instance, totalled $26.6 billion, up 29% from the previous year. Globally, AUM was up 19.8%, according to Scorpio Partnership data.

In its annual report for 2018, the Swiss private bank, which calls Asia its second home market, said it is focusing on five key markets to achieve organic growth: mainland China, Hong Kong, Indonesia, Singapore and India.

It’s a similar story for UBS, the largest private bank in the world, whose assets expanded by a strong 29% to $373 billion in Asia, according to its annual results for 2017, even as global AUM grew by 17%.

“A strong presence in Asia is helping companies experience growth rates closer to 20%, as opposed to those who don’t see the region as a focus area,” Kang said.

There are a few notable exceptions to the Asia-focused rule: the private banking arms of Bank of America, Wells Fargo, and Royal Bank of Canada, which ranked third, fourth and fifth on the Scorpio Partnership list, are much more dominant in North American markets than in Asia.

Still, as Kang points out, their growth rates are lower compared with banks with a stronger Asia presence.