In the dynamic landscape of China's financial sector, recent reports highlight the shifting fortunes of the wealth management arms of various banks, especially in light of the anticipated fundraising trends set to unfold in 2024. As the year approaches, the large state-owned banks are finding their footing in the market once again, with Agricultural Bank of China's wealth management division making a notable comeback, ranking among the top three institutions in terms of assets under management.

The transformation of the wealth management industry has not been without its challengesThe journey towards a net asset value-based framework has brought about tests such as a wave of negative returns and redemptions, leading to a reexamination of competitive dynamicsAnalysts suggest that the banks must eliminate their reliance on cash-based products and focus on developing unique advantages in non-fixed income wealth management servicesThis strategic shift is regarded as essential for continuous growth in a fiercely competitive market.

Since the inception of the first bank-controlled wealth management subsidiary in June 2019, the industry has rapidly evolvedCurrently, a total of 32 wealth management companies have been established, including six from the big state-owned banks, twelve from joint-stock banks, eight from city commercial banks, and a handful from joint venturesThis sturdy foundation sets the stage for robust competition.

According to recent data, the ongoing scale of the bank wealth management market is approximately 29.95 trillion yuan, marking an 11.75% growth since the beginning of the yearWhat stands out in the current landscape is the resurgence of state-owned bank wealth management subsidiaries, often recognized as titans of the financial world.

Among the top five wealth management subsidiaries, the Agricultural Bank of China (ABC) has recovered robustly, now taking the third position in asset managementThis marks a significant shift, as these positions were previously dominated by joint-stock banks in 2023. As per the rankings provided by Puyin Standards, the leading firms in 2024 include China Merchants Bank Wealth Management, Xinyin Wealth Management, ABC Wealth Management, XinYin Wealth Management, and ICBC Wealth Management, boasting asset sizes of 2.44 trillion yuan, 2.16 trillion yuan, 1.97 trillion yuan, 1.95 trillion yuan, and 1.93 trillion yuan, respectively.

Examining the data, it becomes clear that while fixed-income products continue to be a staple for these financial entities, ABC Wealth Management distinguishes itself by having the lowest proportion of fixed-income products among the top five, at 55.2%. In contrast, cash management products, which serve as critical components of their offerings, have gained prominence, with ABC's "Agricultural Bank Instant Payment" products frequently leading in terms of cash management scale

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This performance underscores the evolving priorities of these institutions in terms of product offerings.

Industry experts, such as Yang Qi from Puyin Standards, forecast that both the joint-stock banks and the large state-owned banks are likely to experience significant growth in scale in 2024. As market sentiment shifts and risk appetites improve, the wealth management segment of banks is expected to attract increased capital inflows, heralding a further increase in scales going forward.

The potential of the "fixed income plus" strategy has emerged as a critical competitive tool, transforming the landscape of wealth management productsAlthough cash management and fixed-income products have traditionally formed the backbone of these investments, the changing economic environment has exposed vulnerabilities in their performance, prompting a shift towards a more diversified approach encompassing multiple asset classes and strategies.

Research from CITIC Securities paints a vivid picture of the future of wealth management, predicting that by the end of January 2025, the respective asset management scales for state-owned, joint-stock, city commercial, rural commercial, and other wealth management institutions might reach 9.74 trillion yuan, 13.59 trillion yuan, 5.37 trillion yuan, and 1.30 trillion yuanAs a result, state-owned banks may witness more severe contractions in scale than their counterparts.

Chief analyst Xiao Feifei of CITIC Securities attributes this shrinkage mainly to the regulatory environment concerning interbank demand deposits, which holds a disproportionate influence over state-owned institutionsAs cash management companies reported both scale and return declines, the performance of instruments tied to cash management products, such as interbank certificates of deposit, has also been on a downward trend.

For banking wealth management entities, the only path forward involves a diligent response to evolving market conditions and an unwavering commitment to enhancing core competitive strengths

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Many investment managers recognize that to maintain stability in scale, it is imperative to break free from over-reliance on cash-based methodologies and develop comprehensive propositions in "fixed income plus" strategiesThe diversification of products must be pursued with vigor to build competency in multiple assets and strategic approaches.

Creating standout financial products is deemed a necessary condition for stable growthCheng Lisha, the general manager of the asset management division for Changsha Bank, expressed that 2025 will usher in a period focused on low-volatility, solid investment strategiesThe goal is to refine investment research competencies and develop a well-composed amalgamation of assets and strategies while providing a suite of reliable core products that encompass pure fixed income and "fixed income plus" offerings, aiming to elevate clients' investment experiences.

As the competition within the bank wealth management sector intensifies, challenges such as declining yields on non-standard assets, the abolition of manual interest supplements, and constraints on interbank deposit rates call for significant attentionFinancial professionals suggest that tackling these issues hinges on enhancing capabilities and diversifying strategies to carve out a unique edge within the non-fixed income investment space.

While some wealth management companies strive to cultivate efficiencies by better investing capital into equity markets, executives like Wang Shengming, president of Xingyin Wealth Management, stress their focus on sectors like renewable energy and the low-altitude economy as they continue to actively engage in equity investments.

Recently, Xingyin Wealth Management has initiated projects that leverage its collaborative efforts with branches of Xinyang Bank to launch several stock subscription rights transactions, aimed at fostering growth in specialized technology enterprises across various sectors including pharmaceuticals, semiconductor technology, and advanced manufacturing.

Simultaneously, other wealth management firms are pivoting towards developing long-term investment potential within equity markets

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