Chinese banks need to reshape models
Print Edition
FACING challenges from stringent regulations and disruptive technologies, Chinese banks need to reshape and transform their business models for asset management and wealth management, McKinsey & Company said in its latest banking report.
From 2012 to 2016, China’s asset management market saw a 42 percent annual compound growth rate for assets under management. Among them, banks’ wealth management products are a core driver for growth, with an annual compound growth rate reaching 75 percent, the quarterly report of the consulting firm said.
However, the growth rate fell sharply to below 8 percent in 2017 due to tightened supervision. China’s central bank unveiled new rules in April to better regulate the country’s fast-expanding asset management industry, which will pose great challenges for the sector, said McKinsey.
Compared with global leaders in asset management, McKinsey noted that domestic banks’ investments in their asset management segment is generally “insufficient.”
Meanwhile, digital technology is overturning banks’ traditional way of doing business.
McKinsey predicts that by 2025, income from asset management and wealth management for traditional lenders will decline by 18 percent under the impact of financial technology, thereby leading to losses in return on capital of up to 30 percent. In addition, more non-bank institutions will encroach on the market share of old players.
“China’s banking industry is in a unique era, full of challenges but also containing great development opportunities,” said John Qu, senior partner at McKinsey.
Qu suggests that to cope with these challenges, Chinese banks should strengthen their investment and consulting capabilities, build more professional teams, give full play to the advantages of having such big customer bases and collaborative potential among different business lines, and embrace new technologies.
In wealth management, three home-grown lenders are among the top 25 private banks in the world.
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