China's bank wealth management products see continued growth in September, equity-linked products lead expansion

"Controlling Volatility and Drawdown" Becomes Industry Consensus

By Zhang Xinran and Xu Xiaoxiao | Shanghai Securities News

Following a surge in August, the scale of bank wealth management products (WMPs) has continued to grow rapidly in September, according to the latest industry data obtained by Shanghai Securities News. In terms of incremental structure, equity-linked products have emerged as a key driver of this expansion.

However, the sustained increase in scale has not translated into significant profit gains for wealth management companies. Industry insiders noted that for scale growth to truly convert into profit growth, institutions must enhance their investment research, product development, and risk management capabilities.

Equity-Linked Products Lead the Expansion

According to Wind data, as of the end of August, 14 wealth management companies with assets exceeding one trillion yuan (including six subsidiaries of state-owned banks and eight of joint-stock banks) had a combined outstanding scale of approximately 27.4 trillion yuan, accounting for about 80% of the total market share. Net capital inflows in August alone exceeded 280 billion yuan.

Current data indicates that the rapid growth trend continues into September. As of September 21, data from Puyi Standard shows:

• Total outstanding wealth management products in the market: 52,616, an increase of 620 from August
• Latest total outstanding scale: 33.9 trillion yuan, up 168.6 billion yuan from August

Chen Yingyi, a researcher at the China Development Institute (Shenzhen), told reporters that the continued scale growth in September is broadly in line with the pace of previous years. A key driving factor is the reallocation of funds from maturing high-interest time deposits. Additionally, the demand for wealth management products from both households and enterprises is being further released, providing a stable source of incremental funds.

From an incremental structure perspective, equity-linked products are a major source of this round of scale expansion. Reporters learned that since September, "fixed-income + equity" products alone have seen a net increase of 80 billion yuan. So far this year, the new scale of equity-linked wealth management products has exceeded 2 trillion yuan. Among them, "fixed-income + equity" products grew by approximately 1.78 trillion yuan in the first eight months, with a net increase of about 120 billion yuan in August alone.

This may be related to the overall strong performance of "fixed-income + equity" products. Choice data shows that as of September 21, the average annualized returns for this product category over the past month, three months, six months, one year, and since inception were 2.48%, 1.03%, 1.6%, 2.13%, and 2.96%, respectively.

Furthermore, following the Federal Reserve's rate hike, wealth management companies have seized the opportunity to launch U.S. dollar-denominated products. According to incomplete statistics by reporters, as of September 21, 56 products with "U.S. dollar" in their names have started fundraising. These are predominantly closed-end fixed-income products, with maturities typically ranging from 3 to 6 months or 6 months to 1 year.

The Paradox of Rising Scale Without Rising Profits

Despite the continuous increase in outstanding product scale this year, it has not brought significant profit gains to wealth management companies, and the divergence in net profit growth rates is evident.

Based on semi-annual report data:

• Of the 32 wealth management companies, 23 disclosed net profit figures
• Six companies reported net profits exceeding 1 billion yuan
• CIB Wealth Management, the second-largest by scale, led with a net profit of 1.518 billion yuan
• China Merchants Bank Wealth Management, the largest by scale, ranked second with a net profit of 1.513 billion yuan
• Bank of China Wealth Management, Agricultural Bank of China Wealth Management, Zheshang Bank Wealth Management, and Ping An Bank Wealth Management all saw net profit declines of over 20% year-on-year

Jiao Bing, a researcher at Geshang Fund, told reporters that the logic behind scale growth for bank wealth management subsidiaries does not fully align with the logic of profit growth. The former depends on capital supply, while the latter depends on the institution's ability to convert capital into returns.

Outlook: Can the Expansion Continue?

Looking ahead, whether the bank wealth management market can maintain its expansion depends on both changes in capital demand and the capacity of the asset side to absorb funds.

From the capital side, Chen Yingyi predicts that the function of wealth management products as a substitute for deposits will continue, and the scale center is expected to rise further. However, as the volume of transferable funds decreases, the growth rate may slow. In the fourth quarter, key factors to watch include the seasonal return of funds to bank balance sheets at the end of the quarter, as well as the impact of bond and equity market trends on product net asset values and subscription/redemption activity.

From the asset side, Jiao Bing believes that future scale expansion will be increasingly constrained by the asset side's capacity to absorb funds. Wealth management companies need to reduce product homogeneity, diversify strategy offerings, and better align products with client needs.

In terms of specific strategies, "controlling volatility and controlling drawdown" has become a common goal for many institutions. Beyond this, managing investor expectations is equally important. Jiao Bing argued that wealth management companies must help investors understand that low volatility does not mean no drawdown, in order to avoid a significant gap between client expectations and actual product performance.