CMB strengthens asset-heavy business, expands asset-light busi-ness for risk prevention
China Merchants Bank, a national joint-stock commercial lender, will accelerate its transformation, strengthen its asset-heavy business and further expand its asset-light business, said Miao Jianmin, chairman of the bank.
Systemic risk tends to occur in traditional asset-heavy banking business, such as lending and proprietary financial investments. Traditional commercial banks mainly engage in asset-heavy business, with asset-light business accounting for a relatively small part of their entire business, said Miao at a news conference announcing CMB's 2022 annual results, on Monday.
Silicon Valley Bank is an example of this. Its non-interest net income only accounted for 26 percent of the total, he said.
"If a bank's asset-heavy business encounters problems, even if a large expansion of its asset-light business cannot save the bank," Miao said.
He explained that strengthening asset-heavy business means focusing on quality, such as maintaining a low nonperforming loan ratio, while expanding asset-light business refers to quantity, such as expanding off-balance-sheet financial businesses and other fee-based services.
"We need to continue to expand our asset-light business, particularly wealth management, and further increase its proportion in our portfolio," he said.
Last year, due to interest rate fluctuations and downward valua-tion, many wealth management products offered by Chinese banks' wealth management subsidiaries fell below their net asset values, sparking surging redemptions of WMPs, said Wang Liang, president of CMB.
In response to the pressure caused by net asset value fluctuations and heavy redemptions by retail investors, the bank has conduct-ed a serious reflection on the business of its wealth management subsidiary.
"First, we now require CMB Wealth Management to stabilize its assets under management rather than pursuing an excessive ex-pansion. Second, we need to optimize our product structure, which mainly focused on fixed-income and cash management products in the past … Given that Chinese investors have not yet formed a mature investment concept for wealth management products, we require our wealth management subsidiary to stabi-lize its AUM, optimize its structure, enrich its products and in-crease its allocation of equity assets. Third, we should strengthen our capabilities in investment research, risk management, product innovation and technology support. We are currently working on these areas during the current period of market adjustments," Wang said.
The period of the massive sell-off in Chinese WMPs has passed due to the overall stability of interest rates in China's bond mar-ket this year. Currently, CMB Wealth Management's AUM re-mains stable, he said.
