Banks look for new profit sources
By Sun Min (China Daily)
Updated: 2004-04-20 08:55

As the number of wealthy people in China expands rapidly on the back of an economic boom, local banks are studying new ways of cashing in.

Wealth management is no longer a "foreign" word. Instead, local banks have been learning quickly from their overseas counterparts to promote such services to the rich and to try to keep their clients loyal.

However, wealth management for high-income households or individuals is still underdeveloped in China, said Yuan Yue, chairman of the Horizon Group, a Chinese consulting company.

Financial institutions, especially banks, still have to catch up with the growing demand among the rich for professional services and guidance to help them better manage the assets, he said.

Instead of simply putting the money into banks for meagre interest, people are looking for more flexible services that will bring greater returns.

Horizon has been helping the China Merchants Bank (CMB), a Shenzhen-based shareholding bank, to study the investment demand and views of the rich, so the bank can create more specialized services to win clientele.

Yesterday, the two jointly issued the second "Sunflower" wealth management report and a series of "Sunflower" indices that trace the investment habits of the rich and the macro economic climate. Sunflower is the banking service brand CMB uses to handle its high-income clients, who have a minimum quarterly balance of 500,000 yuan (US$60,386). By the end of March, they were already taking up about 32 per cent of the bank's outstanding savings.

The Sunflower indices, introduced six months ago, have multiple constituents like expectation of the macro-economy and personal income, as well as investment ideology and assessment of existing investment tools.

"Investment behavior and preferences of the rich have a major impact on the macro economy," said Dai Jun, deputy general manager of CMB's retail banking department.

As discovered in the newly released survey, which covered more than 1,000 high-income respondents in seven major Chinese cities, people had shown much more interest in real estate investment last year. Enthusiasm is cooling this year and being diverted by other investment tools like mutual funds and trusts.

Rising prices have also weighed down people's income expectations, while the demand for more diversified wealth management services continues to grow.

All are signals that banks should adjust their marketing strategies, said Dai.

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