- China Merchants sees private-bank assets growing 30 percent
- Plans outlets in Sydney, Luxembourg as wealth moves overseas
As the largest wealth manager for China’s millionaires races to hire bankers, there’s one question it won’t ask prospective employees: Can you bring any clients?
That consideration -- a standard one for private banks in most markets -- is irrelevant in China, where the ranks of the wealthy are growing so fast that the banks trying to serve them are struggling to keep up, according to China Merchants Bank Co.
“What we want from candidates is different from firms in places like Hong Kong,” said Wang Jing, general manager for the Chinese firm’s private-banking department. “Bringing over customers is the last question we ask. It doesn’t really matter how many they can bring.”
Shenzhen-based CMB is planning to hire 300 new private bankers and advisers this year to add to the existing staff of 1,000, as well as expand its overseas network as wealthy Chinese look to put an increasing proportion of their assets in international markets. The private bank’s assets under management are expected to increase 30 percent to about 1.6 trillion yuan ($245 billion) this year, Wang said.
“Unlike private banks elsewhere, there’s no lack of clients,” said Wang, whose department manages money for about 50,000 individuals with at least 10 million yuan of assets. “We need bankers who can provide diversified services instead of bringing in their existing clients, because we already have a lot,” she said.
CMB’s private bank has a natural source of customers from the more than 1.5 million customers in its wealth-management unit. They can move over to the more exclusive private bank as soon as their assets grow beyond the 10 million-yuan threshold.
Wang said she’s not too bothered about foreign banks which are ramping up their wealth-management operations in China. Zurich-based UBS Group AG said in January it will double its staff in China over five years; HSBC Holdings Plc said in February that it will stick to its hiring plan in the country despite cooling economic growth, albeit at a slower pace than originally planned.
“Global banks are indeed stronger in terms of experience and products,” Wang said. “But we grow together with our clients and we have a better grasp of what they need.”
China’s banking and wealth-management industries remain dominated by the local lenders. UBS and Goldman Sachs Group Inc. are the only foreign firms that have broad licenses which allow them to offer a full range of onshore private banking, asset management and brokerage trading services. Foreign private banks tend to manage the wealth of mainland Chinese individuals mainly from their offices in Hong Kong and Singapore.
CMB’s private bank, established in 2007, was the largest in China in terms of assets under management as of 2014, the last period for which fully comparable figures are available. It managed 753 billion yuan, compared with 736 billion yuan at Industrial & Commercial Bank of China Ltd. and 720 billion yuan at Bank of China Ltd., according to the banks’ annual reports.
In China, the number of individuals owning at least $1 million of assets rose more than 17 percent to 890,000 in 2014 from a year earlier and their combined wealth jumped 19 percent to $4.5 trillion, according to data from Capgemini SA. That was more than double the 8.3 percent growth in the number of North American millionaires, and the 9.1 percent increase in their assets, during the same period.
CMB’s fee income from wealth management, which serves clients with an average daily balance of at least 500,000 yuan, roughly doubled in the first nine months of 2015, a stock exchange filing showed. The bank has more than 60 million retail customers and has issued 64 million credit cards in total, according to its 2015 interim report.
Shares of the lender, the nation’s sixth largest by assets, rose 1.4 percent to HK$16.02 at 10:26 a.m. in Hong Kong on Friday, more than the benchmark Hang Seng Index’s 0.8 percent gain. The bank’s stock lost 12 percent this year.
CMB plans to start private-banking operations in Sydney and Luxembourg by the end of this year or early in 2017, to follow customers expanding their overseas portfolios, according to Wang. China’s rich are increasingly making offshore investments to diversify their risks, with a typical wealthy client holding about 20 percent to 30 percent of their assets outside the mainland, she said.
While the yuan has been depreciating from last year, Wang said she isn’t expecting a massive capital flight.
“The mainland is still where they are familiar with and is their home turf,” Wang said. “People can’t just move their money directly out of the country. They are bound by capital controls, which are getting rather strict.”