Financial products are cleared within a limited time, and small and medium-sized

2024-07-28

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Recently, news that the existing wealth management business of small and medium-sized banks may be cleaned up has attracted widespread attention from the market. According to relevant media reports, regulatory authorities recently held a meeting to emphasize the risks of wealth management business for banks that have not established wealth management subsidiaries. They have required some provincial commercial banks and rural commercial banks to completely clean up their existing wealth management business by the end of 2026, with some provincial banks receiving notifications through formal documents or verbally.

At the same time, up to now, the regulators have issued a total of 32 wealth management subsidiary licenses, but Zhejiang Wealth Management has not yet started operations. If it opens successfully later, the national shareholding bank wealth management companies will be fully covered. Now, there is not much time and space left for 258 entities to obtain licenses, and it can be said that the "ticket" for new wealth management companies is "hard to get."

What is the current scale of bank wealth management products? What are the respective proportions of the scale of wealth management products for wealth management subsidiaries and banks without wealth management subsidiary licenses?

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Do the existing wealth management products of small and medium-sized banks have an advantage in terms of returns?

Banks have actually become supermarkets for wealth management products of wealth management subsidiaries, not only selling their own products but also distributing products from various wealth management subsidiaries. For investors, is it better to buy their own products rather than distributing other people's products?

Small and medium-sized banks need to reduce their wealth management products and clear them by the end of 2026. How should investors change their mindset when purchasing wealth management products?

1. What is the current scale of bank wealth management products? What are the respective proportions of the scale of wealth management products for wealth management subsidiaries and banks without wealth management subsidiary licenses?

According to data from Puyi Standards, as of mid-June 2024, the existing scale of the bank wealth management market is about 29.37 trillion yuan, of which the existing scale of wealth management products of wealth management companies is about 25.66 trillion yuan, accounting for 87.39%; the existing scale of wealth management products of banking institutions is about 3.70 trillion yuan, accounting for only 12.61%. It should be noted that some banking institutions that have established wealth management companies still have a small amount of existing wealth management products, which are mainly targeted at institutional, private banking, and other customers, and the overall scale can be considered negligible.Additionally, at the end of last year, Zheshang Bank was approved to establish Zheshang Wealth Management, which will operate as an independent legal financial institution to conduct wealth management services in the future. According to past practices, it is expected that some wealth management products issued and operated by Zheshang Bank will gradually migrate to Zheshang Wealth Management for operation and management. At that time, the scale of wealth management products of banking institutions is expected to be further reduced.

2. Do the existing wealth management products of small and medium-sized banks have an advantage in terms of returns?

Currently, small and medium-sized banks mainly include city commercial banks, rural commercial banks (including rural commercial banks, rural credit cooperatives, and rural cooperative banks), etc. By comparing the performance of existing wealth management products, it is found that compared with wealth management companies, the existing wealth management products of small and medium-sized banks indeed have an advantage in terms of returns, and the advantage of rural commercial banks is even more obvious.

We selected the latest yield indicators of the existing non-cash management products of three types of institutions to calculate the average values, including the average annualized return rate for the past 3 months, the average annualized return rate for the past 6 months, the average annualized return rate for the past year, and the average annualized return rate since the establishment. According to data statistics from Puyi Standards, as of June 25, 2024, the various yield indicators of city commercial banks and rural commercial banks are significantly higher than those of wealth management companies. For example, the average annualized return rate for the past 3 months is 0.67% and 0.87% higher, respectively, the average annualized return rate for the past 6 months is 0.83% and 0.91% higher, respectively, the average annualized return rate for the past year is 1.23% and 1.09% higher, respectively, and the advantage is even more obvious since the establishment, with an average annualized return rate 1.18% and 1.39% higher, respectively.

If the product type is limited to fixed income (excluding cash management products), the advantage of small and medium-sized banks' returns is slightly weakened but still very obvious. The various yield indicators of city commercial banks and rural commercial banks are still significantly higher than those of wealth management companies. For example, the average annualized return rate since the establishment is 1.04% and 1.24% higher, respectively.

3. Banks have actually become a supermarket for wealth management products of their subsidiaries, not only selling their own products but also distributing products from various other institutions and wealth management companies. For investors, is it better to buy their own products rather than those of others?

Self-operated wealth management products refer to products developed by the bank itself and sold by the bank, while distributed wealth management products refer to products developed by other institutions or wealth management companies and sold by the bank as an agent. When banks only sell self-operated wealth management products, investors may consider the strength of the selling institution itself and choose corresponding products based on their own risk preferences when making investment decisions, and the range of choices is relatively limited. However, after banks added distributed wealth management products, investors can purchase products from other institutions at the same institution, expanding the range of choices, but the factors to consider have also increased. Investors should be more cautious when choosing products, paying more attention to the issuing institution and understanding its strength and reputation.

From the perspective of risk control and internal supervision, self-operated products are more controllable, while the risks of distributed products depend more on the issuing institution. However, against the backdrop of increasingly common distributed products and stricter financial regulation, the risks of distributed products will also become more controllable. In general, self-operated products are not necessarily better than distributed products. Investors can choose sales institutions with a good reputation when purchasing products, and then make a comprehensive judgment based on the issuing institution, risk, returns, and other factors.4. Small and medium-sized banks need to reduce wealth management products and eliminate them by the end of 2026. How should investors change their thinking when purchasing wealth management products?

The need for small and medium-sized banks to reduce wealth management products has no significant impact on most investors. Currently, the scale of wealth management products is concentrated in leading institutions, and most investors may not even be aware of the reduction or liquidation of existing products by small and medium-sized banks.

For a small number of investors, the main issues lie in the channels of purchase and the types of products available. Some areas with relatively underdeveloped economies may lack branches of large banks, and local residents primarily conduct various transactions and purchase wealth management products through regional small and medium-sized banks. If these products are eliminated and local banks have not obtained a wealth management company license, then these institutions will need to engage in distribution services to continue providing wealth management services. Given the current situation, it is likely that small and medium-sized banks will shift towards distribution services, allowing investors to purchase products from various wealth management companies locally. Additionally, during the transition process, there may be a period of uncertainty, and investors may consider switching to electronic channels of large banks to directly purchase products, or seek other investment methods, such as switching to deposits.