Chapter 1 Industry Development Overview
1.1 Industry Overview
The so-called "bank wealth management subsidiary" is actually a non-bank financial institution initiated and established by a commercial bank as the controlling shareholder and approved by the banking regulatory agency of the State Council; mainly engaged in wealth management business; independent of the parent bank, with independent legal person status. Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Agricultural Bank of China, China Merchants Bank, Bank of Communications, Everbright Bank, etc. have all been approved to establish their own wealth management subsidiaries.
The reason why banks set up wealth management subsidiaries is actually to strengthen the risk isolation of the bank's wealth management business, and it will also help break the rigid payment. In addition to issuing wealth management products and investing and managing entrusted investor properties, the bank's wealth management subsidiaries also provide financial advisory and consulting services. Its business can be divided into three major sections: public offering products, private offering products, financial advisors and consulting. The wealth management products issued by the bank's wealth management subsidiaries can also be sold through banking financial institutions, and can also be sold through other institutions approved by the China Banking and Insurance Regulatory Commission.
As of the end of March 2022, 29 bank wealth management subsidiaries in the market have been approved for establishment, of which 25 have officially opened, and the overall product existence scale is 17.27 trillion yuan.
Including state-owned banks and joint-stock banks, the five types of wealth management subsidiaries have their own characteristics in operation, and new products such as ESG and pension wealth management are important directions for wealth management subsidiaries.
Divided by type, bank wealth management products that invest in fixed-income assets such as bonds are still the absolute mainstream, but more and more bank wealth management products have also begun to use funds and equity as important capital investment.
1.2 Market Characteristics
Chapter 2 Business Model and Revenue Model
According to the "Summary of Bank Financial Management Market in the First Quarter of 2022" (hereinafter referred to as the "Summary") published by the Banking Wealth Management Registration and Custody Center (hereinafter referred to as the "Custody Center") on April 24, 2022, as of the end of March 2022, the In the market, 29 wealth management subsidiaries of banks have been approved for establishment, and 25 of them have officially opened for business. According to the different types of initiating banks, bank wealth management subsidiaries can be divided into five categories: state-owned banks, joint-stock banks, city commercial banks, rural financial institutions, and Sino-foreign joint ventures.
According to the "Brief Profile" data, among the 29 bank wealth management subsidiaries, joint-stock banks and city commercial banks are dominant in number, with 11 and 7 respectively, followed by 6 state-owned banks and Sino-foreign joint ventures. 4, while rural financial institutions currently have only one wealth management subsidiary. It is worth noting that the four Sino-foreign joint venture wealth management subsidiaries that have been approved to be established are all foreign-controlled.
List of bank wealth management subsidiaries that have been approved for establishment
Source: Asset Information Network Qianji Investment Bank
Among all the wealth management subsidiaries that have been approved, except Goldman Sachs ICBC Wealth Management, which has not yet announced the registered capital, the registered capital of other companies exceeds 1 billion yuan, and the registered capital of the wealth management subsidiaries of the six major banks is 8 billion yuan. Above, and the registered capital of the wealth management subsidiary of the Fourth Bank of Industry and Agriculture China Construction has reached the order of 10 billion yuan.
Table Ranking of Bank Wealth Management Subsidiary Registered Capital
Source: Asset Information Network Qianji Investment Bank
In terms of surviving products, according to the data released by the custody center, as of the end of March 2022, the overall surviving scale of products of bank wealth management subsidiaries was 17.27 trillion yuan, a year-on-year increase of 127%.
Source: Asset Information Network Qianji Investment Bank
Among all wealth management subsidiaries that have announced the surviving scale of their products by the end of 2021, 12 have a surviving scale of more than 500 billion yuan, and 9 have broken through the trillion yuan mark. Among them, the scale of surviving products of CMB Wealth Management, CCB Wealth Management, and ICBC Wealth Management all exceeded 2 trillion yuan, and the top-ranked CMB Wealth Management reached 2.78 trillion yuan.
Table 2021 Surviving Product Scale Ranking of Various Wealth Management Subsidiaries
Source: Asset Information Network Qianji Investment Bank
It should be noted that, according to the data released by the Custody Center in the "Annual Report on China's Banking Wealth Management Market (2021)" (hereinafter referred to as the "2021 Annual Report on Wealth Management"), by the end of 2021, the wealth management subsidiaries will be transferred from the parent bank to The scale of existing products from the future accounted for 41.49%.
Chapter 3 Industry Valuation and Global Leading Companies
3.1 Comprehensive financial analysis and valuation methods of the industry
The valuation method of the bank wealth management subsidiary industry can choose price-earnings ratio valuation method, PEG valuation method, price-to-book ratio valuation method, price-to-cash ratio, P/S price-to-sales ratio valuation method, EV/Sales market-to-sales ratio valuation method Method, RNAV revaluation net asset valuation method, EV/EBITDA valuation method, DDM valuation method, DCF discounted cash flow valuation method, NAV net asset value valuation method, etc.
In terms of profitability, among the wealth management subsidiaries that have released their 2021 net profit data, 10 have a net profit of more than 1 billion yuan, and 4 of them have a net profit of more than 2 billion yuan. Among them, China Merchants Bank Wealth Management ranked first with 3.203 billion yuan, followed by Industrial Bank Wealth Management with 2.806 billion yuan.
However, the profit of wealth management subsidiaries still accounts for a low proportion of bank profits. Taking China Merchants Bank Wealth Management as an example, China Merchants Bank's net profit attributable to the parent after deduction of non-existing expenses in 2021 is 119.43 billion yuan, and the net profit of the wealth management subsidiary accounts for only 2.68% of the parent bank.
Table 2021 Net Profit Ranking of Various Wealth Management Subsidiaries
Source: Asset Information Network Qianji Investment Bank
3.2 Industry development and price-driven mechanism and risk management
According to the data released by the trusteeship center in the 2021 financial annual report, the wealth management subsidiaries of state-owned banks will issue the largest number of products in 2021, with a total of 3,149 products issued; followed by wealth management subsidiaries of city commercial banks, with 2,600 products; wealth management subsidiaries of joint-stock banks Issued 2512 pieces.
Source: Asset Information Network Qianji Investment Bank One Zero Think Tank
Ranked by the amount raised by products, the wealth management subsidiaries of state-owned banks have the highest amount raised, with a cumulative amount of 25.79 trillion yuan; followed by wealth management subsidiaries of joint-stock banks and wealth management subsidiaries of city commercial banks, with 13.88 trillion yuan and 4.18 trillion yuan respectively.
Source: Asset Information Network Qianji Investment Bank One Zero Think Tank
As of now, the wealth management subsidiaries established by the six state-owned banks have all disclosed the latest operating data in the parent bank's 2021 annual report. It can be seen from the data that by the end of 2021, the surviving wealth management scale of each wealth management subsidiary is more than 800 billion yuan, and ICBC wealth management has even reached 2021.8 billion yuan.
Judging from the profit situation in 2021, the most profitable state-owned bank wealth management subsidiary is Bank of China Wealth Management, with a net profit of slightly more than 2.6 billion yuan; followed by CCB Wealth Management and Agricultural Bank of China Wealth Management, with net profits of 2.062 billion yuan and 1.721 billion yuan respectively ; Although ICBC Wealth Management ranks second in the scale of existing wealth management, its net profit is the lowest among the wealth management subsidiaries of the six major banks.
Table 2021 Main Operating Data of State-owned Bank Wealth Management Subsidiaries
Source: Asset Information Network Qianji Investment Bank
The wealth management subsidiaries of state-owned banks have a large scale of existing products, and they are also ahead of other categories in product issuance and fundraising. In 2021, the wealth management subsidiaries of state-owned banks issued a total of 3,149 products, and the cumulative amount raised reached 25.79 trillion yuan, leading other types of wealth management subsidiaries in both the number of issues and the amount raised.
While taking the lead in scale, wealth management subsidiaries of state-owned banks are also distinctive in many aspects. After sorting out the regular reports of large state-owned banks, it was found that 4 banks introduced the business characteristics of their wealth management subsidiaries in a special space in their 2021 annual reports.
Source: Asset Information Network Qianji Investment Bank One Zero Think Tank
In terms of emerging pension wealth management, the wealth management subsidiaries of state-owned banks also acted quickly. According to the "Notice on Expanding the Pilot Scope of Pension Wealth Management Products" issued by the China Banking and Insurance Regulatory Commission on February 25, 2022, China Post Wealth Management, Bank of Communications Wealth Management, Bank of China Wealth Management, and Agricultural Bank of China Wealth Management have been added as pilot institutions for pension wealth management products. ICBC Wealth Management and CCB Wealth Management, which are in the first batch of pilot projects, and six wealth management subsidiaries of major banks have all been approved to carry out pension wealth management business.
It should be noted that as of April 25, 2022, only ICBC Wealth Management and CCB Wealth Management have issued pension wealth management products among the wealth management subsidiaries of state-owned banks.
Source: Asset Information Network Qianji Investment Bank One Zero Think Tank
According to the statistics of Wind, as of April 25, 2022, after excluding products in the process of being issued and products that have already expired, there are 10,827 existing wealth management subsidiary products in the market, of which 10,626 have obtained registration codes (all bank wealth management products) All products need to be registered in the custody center and obtain a unique registration code before they can be sold externally). Divided by the type of initiator, among the 10,626 products, the largest number of surviving products is the largest, followed by joint-stock banks and city commercial banks, while the total number of products of rural commercial banks and Sino-foreign joint ventures is less than 400.
In terms of branch data, there are currently 7 wealth management subsidiaries with more than 500 surviving products, 11 wealth management subsidiaries with more than 400 surviving products, and among them, ICBC Wealth Management and CMB Wealth Management have more than 1,000 surviving products. On the other hand, SPDB Wealth Management, Guangyin Wealth Management, BlackRock CCB Wealth Management, Huihua Wealth Management, and Schroeder Bank of Communications Wealth Management have less than 200 surviving products.
According to Wind statistics, among the wealth management subsidiaries that will launch new products in 2021, ICBC, Qingyin, Bank of China, China Merchants Bank, and CCB will each have more than 500 new products, of which ICBC wealth management will exceed 800. At the same time, although Qingyin Wealth Management is not a leading company in the industry, the number of new products released in 2021 will exceed 760, ranking second in the industry.
In stark contrast to a large number of newly issued products, the scale of existing products of Qingyin Wealth Management at the end of 2021 is only 167.8 billion yuan, ranking third from the bottom among all wealth management subsidiaries that have announced product scale. The scale of 167.8 billion yuan is only equivalent to 6% of China Merchants Bank's wealth management.
The product stock of wealth management subsidiaries is huge, and investment in fixed-income assets such as bonds is still the absolute mainstream. According to statistics from Wind, among all the surviving products of wealth management subsidiaries that have obtained registration codes, according to the classification of investable assets, there are more than 10,000 products that can be invested in bonds, more than 6,600 products that can be invested in funds, and nearly 4,500 products that can be invested in stocks.
In stark contrast to a large number of products invested in bonds and funds, only 90 of the existing products can be invested in exchange rates, which is very small among all products. After further comparison, it was found that these 90 products are all stock products of China Post Wealth Management, of which 89 are structured wealth management products.
Figure wealth management subsidiary surviving products can be invested in assets statistics (unit: only)
Source: Asset Information Network Qianji Investment Bank
3.3 Competition Analysis
According to the data released by the Custody Center in the 2021 financial annual report, by the end of 2021, the scale of capital-guaranteed financial management excluding structured deposits has been reduced from 4 trillion yuan at the beginning of the announcement of the new asset management regulations to zero, which means that Guaranteed wealth management has withdrawn from the stage of history.
In terms of product performance of wealth management subsidiaries, according to Wind data statistics, after removing products that have not announced their net value for more than half a year and have been established for less than a month, 8331 of the remaining 9609 products have achieved positive annualized returns since their establishment, of which 5980 Only the product annualized outperformed the 3-year fixed deposit benchmark interest rate (currently 2.75%). After further analysis of the data, it was found that the top ten products with positive annualized returns all belong to the fixed income category. However, it should be noted that among the top ten products, some products also invest in non-standard debt assets, including but not limited to credit assets, trust loans, entrusted claims, etc. On the other hand, among the 1,278 products with annualized negative returns, 54 products have an annualized loss of more than 10%.
net profit
As of the end of 2022, a total of 12 banks have released their annual reports for 2022. Among them, the performance of six bank wealth management subsidiaries of CCB Wealth Management, China Everbright Wealth Management, China Merchants Bank Wealth Management, CNCB Wealth Management, Ping An Wealth Management, and Minsheng Wealth Management has been announced last year.
Judging from the operating situation of wealth management subsidiary last year, CMB wealth management will achieve the highest net profit of more than 3.5 billion yuan in 2022; , the net profit of the remaining three wealth management subsidiaries all exceeded 1 billion yuan, and the total net profit of the six wealth management subsidiaries reached 13.28 billion yuan.
Judging from the year-on-year growth rate of net profit, except Minsheng Wealth Management, which was just established and opened in 2019, the net profits of the other five wealth management companies all achieved double-digit growth year-on-year. Among them, CCB Wealth Management has the highest growth rate. Data show that CCB Wealth Management's net profit in 2022 will be 2.840 billion yuan, a year-on-year increase of 37.73%. In addition, during the reporting period, Everbright Wealth Management realized a net profit of 1.879 billion yuan, a year-on-year increase of 18.47%.
Ping An Wealth Management followed closely behind, achieving a net profit of 1.882 billion yuan in 2022, an increase of 16.46% over the previous year. In addition, during the reporting period, CNCB Wealth Management realized a net operating income of 3.553 billion yuan and a net profit of 2.048 billion yuan, an increase of 16.88% and 13.40% over the previous year, respectively. CMB Wealth Management achieved a net profit of 3.593 billion yuan last year, a year-on-year increase of 12.18%.
In terms of total assets, CCB wealth management exceeded 20 billion to 21.087 billion yuan, CMB wealth management exceeded 18 billion yuan, CNCB wealth management exceeded 10 billion yuan by the end of 2022, and Ping An wealth management approached 10 billion yuan to 9.625 billion yuan. In addition, Everbright Wealth Management is 8.861 billion yuan, and Minsheng Wealth Management is 6.638 billion yuan.
Management scale
The six wealth management subsidiaries excluded the Minsheng wealth management established last year. Judging from the balance of wealth management products managed at the end of 2022, there are differences in the rise and fall.
Specifically, as of the end of 2022, the balance of wealth management products managed by CMB Wealth Management was 2.67 trillion yuan, a decrease of 3.96% from the end of the previous year. According to the annual report of China Merchants Bank, in the first 10 months of 2022, the overall scale of China Merchants Bank's wealth management products remained stable. In November 2022, the bond market experienced the largest sharp drop in the past two years, triggering fluctuations in the net value of bond funds and bank wealth management products. The overall wealth management business has been impacted, and the net value of some products has withdrawn sharply in the short term, and the scale of wealth management in the industry has declined to varying degrees. The balance of wealth management products managed by CMB Wealth Management will decrease by 4.88% and 5.60% month-on-month at the end of November and December 2022, respectively.
Minsheng Wealth Management was established just last year. From the perspective of the parent bank as a whole, the annual report shows that by the end of 2022, the total scale of Minsheng Bank and Minsheng wealth management products is 883.977 billion yuan. Affected by the sharp shock in the bond market in the fourth quarter, the scale of wealth management products decreased by 12.72% compared with the end of the previous year.
The latest CCB annual report disclosed on the evening of March 29, 2023 shows that at the end of 2022, the scale of CCB’s wealth management products was 1,911.028 billion yuan, while at the end of 2021, the scale of CCB’s wealth management products was 2,188.330 billion yuan. According to calculations, by the end of 2022, the scale of CCB's wealth management products has dropped by more than 12% compared with the end of the previous year.
The management scale of Everbright Wealth Management and CNCB Wealth Management has increased to a certain extent. Data shows that by the end of 2022, the total assets under management of Everbright Financial Management will be 1,185.241 billion yuan, an increase of 117.532 billion yuan or 11.01% over the end of the previous year. According to the CNCB wealth management business report, as of the end of 2022, CNCB wealth management company has 1,252 surviving products, with a total product value of 1.49 trillion yuan, an increase from the end of 2021.
According to the relevant data of the group caliber disclosed by Ping An Bank, as of the end of 2022, the balance of non-principal-guaranteed wealth management products of Ping An Bank was 886.840 billion yuan, an increase of 1.7% from the end of 2021. At the end of the year, it increased by 4.4%, and its proportion in the balance of non-principal-guaranteed wealth management products rose from 96.1% at the end of 2021 to 98.7%.
Industry insiders said that in 2022, the wealth management market will experience two violent fluctuations in the equity market at the beginning of the year and the bond market at the end of the year. The annual report on China's banking wealth management market (2022) shows that by the end of 2022, the existing scale of bank wealth management products will be 27.65 trillion yuan, a decrease of 4.66% from the beginning of the year.
Breakage rate
In fact, under the background of several rounds of wealth management products that experienced a large-scale bankruptcy last year, bank wealth management companies have frequently launched low-volume stable products and amortized cost method products. China Merchants Bank stated in its annual report that CMB Wealth Management has successfully passed the period of huge fluctuations in the bond market through measures such as improving the level of product reserves, enriching wealth management product series and strategies, strengthening product information disclosure and investor appropriate sales management. During the reporting period, CMB Wealth Management fully met the redemption needs of customers for various products without any redemption risk.
Minsheng Bank stated that in 2022, the bond market will undergo a substantial adjustment, which will trigger a retracement of the net value of wealth management products, and the overall scale of wealth management products will fluctuate greatly. On the asset side, strengthen the ability to acquire assets with stable valuations and reduce fluctuations in the net value of products; on the other hand, predict interest rate trends forward-looking, formulate a unified investment strategy and framework at the level of people's livelihood wealth management, and implement hierarchical management and control of asset allocation and process early warning Management, strictly control the withdrawal of net worth.
According to China Merchants Bank, in terms of net loss of products, due to the early transformation of CMB’s wealth management net value type, it has vigorously developed products with a high proportion of equity assets. On average, the percentages of PR2, PR4, and PR5 products that broke net are all lower than the industry average.
Since 2023, the phenomenon of bank wealth management products breaking net has significantly eased. The Mingming team of CITIC Securities pointed out in the research report that according to calculations, as of the end of February, the scale of bank wealth management was about 26.18 trillion yuan, a sharp reduction in the month-on-month decline. As of March 17, the net loss rate of bank wealth management has dropped to 5.23%, basically returning to the level before the redemption wave. The Mingming team believes that the month-on-month growth rate of bank wealth management scale will turn positive in March, and the impact of redemption will be basically eliminated. The bond market is expected to fluctuate and strengthen under the RRR cut. At the same time, it is expected that the scale of wealth management in the second half of 2023 will return to the level of more than 29 trillion yuan , It is also expected to boost the bond market to strengthen in the second half of the year.
Regarding this year’s development, China Merchants Bank stated in its annual report that in 2023, the momentum of domestic economic growth is expected to increase quarter by quarter, which is reflected in the investment strategy of large categories of assets. Investment in the equity market may usher in opportunities, and bonds are expected to fluctuate and adjust as the economy recovers. Pattern, the scale of bond wealth management products is expected to further shrink. In view of the fact that after the bank wealth management market has experienced a redemption wave, market confidence still needs to be restored. It is closely related to the overall performance of the market.
3.4 Important Competitors in China
(1) CMB Wealth Management: Born in Shenzhen, Guangdong, and established on November 1, 2019, it is a wholly-owned subsidiary of China Merchants Bank Co., Ltd. It is mainly engaged in the issuance of public offering wealth management products, private placement wealth management products, financial consultants and consulting assets Manage related businesses.
(2) Bank of China Wealth Management: It is a personalized and high-quality investment and wealth management service brand specially created by Bank of China for VIP customers. Adhering to the tenet of "customer-oriented, continuous innovation", professional account managers provide customers with "one-to-one" high-quality banking services in the customer's exclusive wealth management space, allowing customers to fully enjoy the benefits brought by "BOC Wealth Management" life of reverence. At the same time, relying on the global service network at home and abroad, experienced financial management experts and diversified investment and financial products, it will comprehensively take care of the financial management needs of customers and help customers realize the preservation and appreciation of wealth.
(3) Ping An Wealth Management: It was registered and established with the Market Supervision and Administration Bureau of the Free Trade Zone on March 16, 2011. The legal representative is Zhang Yaohui. The business scope of the company includes investment management, asset management, business information consulting, and corporate management consulting.
Chapter Four Future Industry Outlook
Bank wealth management subsidiaries have already occupied a pivotal position in the current asset management industry. Relying on the ability of launching banks in brand, channels, customers and investment research, bank wealth management subsidiaries are rapidly occupying the share of the asset management market. As of the end of March 2022, 29 bank wealth management subsidiaries have been approved for establishment, of which 25 have officially opened for business. The existing scale of wealth management subsidiary products exceeds 17 trillion yuan, a year-on-year increase of 127%.
In addition to continuing to consolidate its advantages in the field of fixed income, the bank's wealth management subsidiary will also expand into areas such as pension wealth management and equity asset investment. On April 26, 2022, the China Securities Regulatory Commission issued the "Opinions on Accelerating the High-quality Development of the Public Offering Fund Industry" and proposed to moderately relax the limit on the number of public offering licenses under the same entity, and support professional asset management institutions such as bank wealth management subsidiaries to apply for public offering fund licenses in accordance with the law , engaged in public offering fund management business. This will also create more possibilities for bank wealth management subsidiaries to develop the asset management market.
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