Wealth management business to reach $19b in 10 years

Wealth management is increasingly becoming a core business for Chinese commercial banks during their operational transformation, as interest rate liberalization restrained bank profit growth and corporate credit demand slowed down amid the economic downturn.

Ma Xutian, president of Bank of Communications Co Ltd's Asset Management Center, said on Thursday that wealth management has huge room for growth in China.

"We expect the size of the wealth management market for Chinese banks will hit up to 120 trillion yuan ($19 trillion) in the next 10 years. It will bring an intermediate business income of up to 1.2 trillion yuan, accounting for more than 30 percent of the Chinese banking sector's total profits," he said.

By the end of June, assets under management of domestic banks' wealth management services exceeded 18 trillion yuan, increasing at a compound annual growth rate of 30 to 40 percent since 2005.

About 70 to 80 percent of the banks' outstanding wealth management money is invested in bonds, unlisted equities and non-standard assets, contributing more than 10 trillion yuan to the real economy, Ma said.

According to the China Banking Regulatory Commission, non-standard assets refer to debt-financing instruments that are not traded in stock exchanges or the interbank market. They include credit loans, trust loans and acceptance bills.

"Developing wealth management services will help commercial banks turn their focus from taking deposits to managing financial assets and thus retaining clients amid a growingly fierce competition," Ma said.

It will also help commercial banks meet the challenges of shrinking interest margins, the slowdown in Chinese economy and the flowing-out of deposits to other investment channels, such as the stock market, he continued.

Bank of Communications had a rapid growth in wealth management in the last two years. During this period, the financial assets of its individual clients increased by more than 200 billion yuan a year.

As of June 30, the bank's outstanding wealth management business exceeded 1.3 trillion yuan, up 28 percent from the beginning of 2015.