Ren Tao is a distinguished researcher at the Shanghai Finance and Development Laboratory
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1. The policy requirements for small and medium-sized banks to withdraw from wealth management business have been in place for a long time, and this time it is clear that the full amount will be reduced to 0 by the end of 2026
Although there has been a lot of discussion in the market about the withdrawal of small and medium-sized banks from the wealth management business recently, looking ahead, it will be found that the policy requirements for small and medium-sized banks to withdraw from the wealth management business have actually been in place for a long time.
(1) In the first half of 2021, local regulatory authorities began to provide window guidance, requiring small and medium-sized banks to continue to reduce indirect investment business, non-standard business in other places and local financial exchange business, which shackled small and medium-sized banks to carry out wealth management business.
In September of the same year, some media reported that the regulator had made it clear that "banks that have not set up wealth management companies will no longer be able to add new wealth management business, that is, the stock scale will be locked in and gradually digested". The background here should be that the transition period of the new asset management regulations is at the end of 2021, and it is understandable that the regulators are making such a request at the end of the transition period.
(2) In mid-June 2024, some regions issued a document requiring banks without wealth management sub-qualifications to reduce the wealth management scale to 0 in full and liquidate their assets by the end of 2026. It is understood that this news is true and is not a single province, and some regions have conveyed this request in the form of window guidance, and some regions have made this request earlier.
This is the second time since September 2021 that the regulator has released similar policy information, which should not be much different in nature, that is, both require small and medium-sized banks that do not meet certain conditions (such as not setting up wealth management companies) to gradually withdraw from wealth management business. However, unlike before, this time the exit conditions and deadline have been clarified, that is, the countdown to the exit of the wealth management business of small and medium-sized banks.
Second, the number of wealth management banks is declining year by year, but the pace of decline is relatively slow
In addition to the policy requirement to reduce the scale of wealth management of small and medium-sized banks, the number of wealth management banks has actually been declining year by year in recent years. Specifically, from 2021 to 2023, the number of banking institutions with existing wealth management products will be 301, 278 and 258 respectively, and the number of banking institutions with wealth management products will be 319, 260 and 228 respectively.
However, compared with the policy requirements, the number of banking institutions with existing wealth management and those still issuing wealth management is still as high as 258 and 228 respectively, which is still at a high level overall, which means that the current pace of decline in the number of wealth management banks is relatively slow.
3. What is the scale of financial management that needs to be reduced by the end of 2026? A rough estimate is about 3.2 trillion
Now that the target of the pressure drop and the time of the pressure drop have been clarified, it is necessary to estimate the amount of financial management that needs to be reduced by the end of 2026.
(1) The 23.54 trillion wealth management scale of wealth management companies and national banks does not need to be reduced
First of all, according to the "Wealth Management Market Report (2023)", the scale of existing wealth management by the end of 2023 is 26.80 trillion yuan, and there are a total of 32 wealth management companies (all 18 national banks, 8 urban commercial banks, 1 rural commercial bank and 5 joint venture wealth management companies). This means that the 32 wealth management companies and the corresponding 18 national banks do not need to be reduced.
According to the "Wealth Management Market Report (2023)", by the end of 2023, the total wealth management scale of 32 wealth management companies and 18 national banks will be 23.54 trillion yuan (that is, 22.47 + 0.62 + 0.45), which does not need to be reduced.
(2) The total wealth management scale of the remaining banks is 3.25 trillion yuan, and it is estimated that 3.2 trillion yuan of financial management needs will be reduced to 0
According to the wealth management market report, by the end of 2023, the wealth management scale of urban commercial banks, rural financial institutions and other institutions will be 2,183.6 billion yuan, 986.5 billion yuan and 83.9 billion yuan respectively, totaling 3.25 trillion yuan.
Considering that at least 7 of the 9 local banks with wealth management companies have transferred all their wealth management scale to the wealth management company system, while Huishang Bank and Chongqing Rural Commercial Bank have not disclosed data (the wealth management scale under the combined caliber is 177.319 billion yuan and 109.564 billion yuan respectively). If it is assumed that 85% of the existing wealth management scale of Huishang Bank and Chongqing Rural Commercial Bank has been transferred to their wealth management companies (i.e., Huishang Bank and Chongqing Rural Commercial Bank themselves also own 26.598 billion yuan and 16.435 billion yuan respectively, totaling 43.033 billion yuan), which means that the total scale of existing wealth management owned by local banks without wealth management companies is roughly 3.21 trillion yuan (about 21836 + 9865 + 839-430). That is, by the end of 2026, the scale of wealth management that other banks need to reduce is 3.21 trillion yuan.
(3) How to reduce pressure?
After the pressure drop object and the pressure drop volume are clarified, the pressure drop path needs to be clarified.
1. Since there are still two and a half years before the end of 2026, this means that the most direct pressure drop path is that the stock will naturally expire without adding new crops and not renewing it. During this period, these banks need to maintain customers through agency sales and other deposit products, and wealth management companies and institutions with other investment channels can also strengthen cooperation with such banks to win the reduced stock of wealth management customers and realize the exchange of resources with small and medium-sized banks.
2. For the existing wealth management products with a maturity period after the end of 2026, the current volume should be relatively small, and the impact on the entire market may be almost negligible.
3. Benefiting from the guidance of the policy department, the financial industry is now emphasizing "squeezing water", considering the existence of a large number of "pseudo net worth" wealth management products, which means that the scale of wealth management products should also have a certain amount of water, which may need to be squeezed. In this process, the pattern of the wealth management market will continue to move in the direction of differentiation.
4. Is it possible for the family members of wealth management companies to expand in the future?
(1) It may be difficult to add new family members of the subsequent wealth management company
Looking back at the timeline of the establishment of wealth management companies, it is mainly concentrated in 2018-2021 (2, 15, 7 and 5 respectively), while in 2022 and 2023, only 1 will be approved (i.e., Beijing Bank Wealth Management and Zhejiang Bank Wealth Management), the pace has slowed down significantly, which means that the number of wealth management companies approved and established each year will not exceed 1, and it takes hard work to apply for a new wealth management company, and the level of approval and communication will also be greatly improved, which is basically impossible to rely on the bank's own strength.
(2) Which banks are still possible? It is expected that there will be about four (Shanghai Rural Commercial Bank, Chengdu and Guangdong have a higher probability)
1. According to the author's statistics, by the end of 2023, there are 20 banks with a wealth management scale of more than 50 billion yuan, and the top banks are Shanghai Rural Commercial Bank, Chengdu Rural Commercial Bank, Bank of Chengdu, Zhongyuan Bank, Bank of Suzhou, Bank of Jilin, Bank of Guiyang, Bank of Tianjin, etc. This means that the Shanghai Rural Commercial Bank, which has a scale of more than 180 billion yuan, is likely to be approved to set up a wealth management company, while the likelihood of other banks is relatively low.
2. It is estimated that the remaining banks can only take the path of joint wealth management companies to set up, that is, the regulatory authorities will most likely set up indicators according to the regional wealth management volume. In fact, the 2021 wealth management market report also clearly proposes to actively explore the mode and path of small and medium-sized banks to set up wealth management companies, and proposes to implement the policy of expanding opening up and introducing foreign investment, and build an ecosystem where each can show its strengths, cooperate organically, and coexist. Unfortunately, this idea never reappeared.
3. In addition to Shanghai Rural Commercial Bank, the total wealth management scale of Chengdu Bank and Chengdu Rural Commercial Bank in Sichuan is close to 150 billion yuan, and it is possible to jointly establish a wealth management company in the future. Considering the size of regional banks and the size of the economy in which they are located, local banks in Guangdong may also apply for the establishment of wealth management companies through joint means, such as Bank of Guangzhou, Guangzhou Rural Commercial Bank, Dongguan Rural Commercial Bank, Shenzhen Rural Commercial Bank, Bank of Dongguan and Shunde Rural Commercial Bank, with a total wealth management scale of 230 billion yuan, which has the possibility of establishment.
At the same time, there are a large number of high-quality rural commercial banks and some high-quality urban commercial banks in Zhejiang, and these banks may also join forces to set up wealth management companies. According to this logic, the number of new wealth management companies is expected to be about 4 in the future.
Source: Sycamore Tree Think Tank