China Bank Sells More of Riskiest Wealth Management Products

Updated on
  • Pre-IPO document for Guangdong bank gives WMP market snapshot
  • Guangzhou Rural Commercial Bank poised to list in Hong Kong

A Chinese bank preparing to list in Hong Kong said that it had ramped up sales of its riskiest wealth management products as investors sought higher returns.

Guangzhou Rural Commercial Bank Co.’s preliminary listing document gave the latest insight into the nation’s 26.3 trillion yuan ($3.8 trillion) market for the investment products.

The bank in Guangdong province sold 93 billion yuan of “level 5” products -- the highest of its five risk categories -- in the nine months ended September, according to its filing to Hong Kong’s stock exchange Wednesday. That amounted to a third of the bank’s sales of the products, up from 6 percent in 2015.

Analysts are watching for the effect on banks and the wealth management products that they sell of a bond market rout -- since much of the money put into the products ends up in bonds -- and of plans by the central bank to increase oversight.

The People’s Bank of China plans to keep a closer watch on the risks that wealth management products pose for individual banks from this quarter, the central bank-controlled Financial News reported last month.

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Money invested in Guangzhou Rural Commercial Bank’s wealth management products was channeled into “money market instruments, debt securities, non-standard credit assets and equity products,” the lender said in the latest filing.

Demand for “relatively higher return and higher risks,” meant that some customers were willing to forego the principal guarantees that come with the safest products, it said.

Guangzhou Rural Commercial Bank plans to sell as many as 3.13 billion shares in Hong Kong, according to a statement on the website of the China Banking Regulatory Commission.

— With assistance by Jun Luo

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