China Merchants Bank outlines plans to build wealthy family offices

China Merchants Bank (CMB) has opened a wealth management center in Hong Kong that offers a wider range of products and services than its other branches. It plans to have similar activities in London, Los Angeles, Luxembourg and Sydney.

The branches in Luxembourg and Sydney are expected to open later this year or early next year. The other two will open in the next three years, Wang Jing, general manager of private banking, told a press conference yesterday.

Shenzhen-based CMB, which operates China’s largest private bank, is expanding rapidly in the wealth management segment like its mainland counterparts. In the first half of this year, private banking assets under management (AUM) rose 11% to $ 265 billion, with customer numbers increasing 10% to $ 64,000 over the same period.

It did so after AUM rose 24% to $ 239 billion last year, five places in 15th place in the most recent ranking of consulting firms Scorpio Partnership of the largest private banks in the global AUM released this month (see chart below ). CMB had only made it into the top 25 along with ICBC in 2015, while the Bank of China did so last year.

Private banks worldwide classified according to AUM (click for larger view)

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

CMB’s offshore assets include proceeds from sales of shares in overseas markets by customers, cash on hand from overseas transactions, and investments made when China’s foreign exchange policy was relaxed, Liu said. Regarding the latter, he was referring to the strict capital controls Beijing has placed on outflows in recent years.

Chinese customers are also in need of services due to their overseas emigration and overseas education for their children, Wang said. In addition, wealthy Chinese will continue to invest more overseas over time, Liu said.

Of course, CMB faces stiff competition from global private banks in overseas markets. But even the largest private banks in the world use external resources, said Wang. As they did, CMB will grow its skills and select the best funds for clients, she noted.

New business background

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

China Merchants Bank International Capital (CMBI), the group’s investment banking unit, launched the second private banking platform in Hong Kong in 2016 to serve clients whose companies have used CMBI for business services.

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

The third branch, the new private wealth management center, falls under CMB’s Hong Kong commercial bank. Many of his clients use it as a custodian for their company records, Wang said.

CMB’s Hong Kong office currently has 290,000 customers with total balances of HKD60 billion (US $ 7.7 billion). So far, however, only billing and a few basic services have been provided.

The new center will offer products for insurance, stocks, bonds, funds, structured products and derivatives, and services such as asset protection, inheritance and family tax planning, said Chen Yixin, general manager of retail banking in Hong Kong.

The three private banking branches in Hong Kong have different target customers, so there isn’t much overlap, although there might be recommendations, Wang said. For example, if a CMBI customer needs family trust services, they may be referred to Wing Lung Bank, which has a trust license, she said.

In addition to Hong Kong, CMB opened a private banking center in Singapore in April and one in New York last April.

CMB has set the investable wealth threshold for customers eligible for private banking services at Rmb 10 million (US $ 1.5 million).

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