The Pain of Banking Financial Management Transition: The Speed of Net Value Transition

category:Finance
 The Pain of Banking Financial Management Transition: The Speed of Net Value Transition


On the basis of the decline in the scale of financial management, the revenue of financial management business of many banks has declined sharply, even halfway down. The reason is that the industry points to the continuation of non-standard new and old products.

A bank executive said that the non-target recognition criteria had not yet been issued. Most non-standard assets began to recover from the end of last year to this year, and the yield of new non-standard assets was lower than that of matured assets. The requirement of term matching increases the difficulty of issuing financial products.

Financial management scale and income declined

The scale of financial management of joint-stock banks remains roughly unchanged. By the end of June, the non-guaranteed balance of China Merchants Bank, Pudong Development Bank, Industrial Development Bank and CITIC Bank had exceeded trillion yuan, which were 2.11 trillion yuan, 1.37 trillion yuan, 1.21 trillion yuan and 1.10 trillion yuan respectively, an increase of 2.81%, 0.77%, 1.50% and 3.80% compared with the end of last year.

Although capital-preserving financing still exists, its scale is very small. By the end of June 2019, the balance of financial products (the sum of changes in customer principal and net value products, excluding structural deposits) of the bank was 2026.052 billion yuan, an increase of 3.47% over the end of last year, of which the balance of financial products outside the balance sheet accounted for 98.35%. Societe Generale Banks Capital-Guaranteed financial balance was 21.254 billion yuan, while its non-capital-guaranteed financial balance was 12.64 billion yuan, an increase of 14.72% over the same period last year.

Among other banks, the non-guaranteed financing scale of Guangda, Ping An, Huaxia and Zhejiang joint-stock banks was 70.4506 billion yuan, 57.4853 billion yuan, 504.546 billion yuan and 34.2097 billion yuan, respectively, which increased by 2.25%, 6.89%, 7.51% and 0.52% compared with the end of last year.

On the basis of the decline in the scale of financial management, the revenue of financial management business of many banks has declined sharply, even halfway down.

For example, in the first half of 2019, ICBC earned 505 million yuan in fees and commissions on non-capital-protected financial products, a decrease of 38.71% over the same period last year. Bank of China earned 3.799 billion yuan in handling fees, trusteeship fees and management fees related to non-capital-guaranteed financial products, public funds and asset management plans, a decrease of 24.05% over the same period last year. ICBC pointed out in its financial report that it actively promoted product transformation according to the requirements of the new capital management regulations, and that the decline in the scale of Capital-Guaranteed financial products after maturity increased the amount of customers paid in the current period and anticipated payment.

In addition, the processing fee and commission income for the confirmation of non-guaranteed financial products by China Merchants Bank was 2.962 billion yuan, down 53.15% from the same period last year. Societe Generale Banks fee income from providing management services to investors of structured entities under its management was 11.238 billion yuan, down 13.5% from the same period last year. Minsheng Bank earned 2.591 billion yuan in fees and commissions through non-guaranteed financial products, funds and asset management plans, down 17.59% from the same period last year.

Nevertheless, some banks have gained higher revenue from financial management business against the trend.

CITIC Bank recognized 1.925 billion yuan in fees and commissions for non-guaranteed financing, an increase of 220.30% over the previous year, but its net interest income was 612 million yuan, a decrease of 53% over the previous year. Among the benefits of non-guaranteed financial products, the net income of handling fees and commissions of Agricultural Bank of China was 2.296 billion yuan, an increase of 30.98% over the same period of last year. In addition, the net income of interest generated by borrowing and purchasing non-guaranteed financial products was 302 million yuan. Procedure fee income from funds, trusts, asset management plans and non-guaranteed financial products was 1.960 billion yuan, an increase of 34.99% over the same period of last year.

The Source of Scale Pressure

What causes the financial scale to be under pressure and the income to fluctuate violently? Mainly lies in the continuation of old and new products.

Although the new interpretation of the Peoples Bank of China after July 20 last year has provided some room for the follow-up of non-standard assets, most of them began to recover from the end of last year to this year, and support for the investment side will also be delayed. Liu Hui said.

The requirement of term matching makes it difficult for new products to dock with old assets.

Liu Qiuwan, Chief Information Officer of the Bank of China, pointed out at the performance meeting of the industry that the total scale of the off-balance sheet financial products of the Bank of China, which had to be rectified by the end of June, was 1.15 trillion yuan, down 550 billion yuan from the time when the new regulations were issued. At the same time, the scale of off-balance sheet financial products conforming to the new regulations was 182 billion yuan, an increase of 146.8 billion yuan compared with the time when the new regulations were issued.

Liu Qiuwan pointed out that Capital-Guaranteed financing has been accounted for in the table and managed according to deposits. For off-balance-sheet financial management in line with the new regulations, the way of changing the manager will be transferred to the financial management company. For off-balance-sheet financial management to be rectified, the emphasis is on the rectification and dissolution of the assets. In addition to the natural maturity of assets, taking into account the asset characteristics of positions, it is proposed to take a variety of measures such as new product acceptance, early termination, secondary market sale and partial bid-back to actively resolve the problem and properly complete the pressure drop of inventory management products. The senior management of postal savings bank pointed out at the performance meeting of the industry that the bank is about 8000. Among billions of financial products, non-standard accounts for about 10%, the lowest proportion in the industry, and the transformation pressure is relatively small. The next step will be to deal with non-standard assets, one is to recover; the other is to return the statement, not to increase the risk in the statement; and the third is to dock new products.

As far as product structure is concerned, the time limit requirement of new and old financial products makes financial funds diverted, and the number of competitors is also increasing.

A bank executive pointed out that non-standard products are basically more than three years old, which can be mismatched by time limit before. The new regulations require time limit matching, while short-term products are difficult to find time limit matching. It is anticipated that some of the 3-6 month products that the new regulations require to be reduced will gradually be diverted to cash management financial products. However, medium and long-term products often require more than three years of customer funds. At the current stage, there will be many competitors, such as direct competition with the consignment trust.

Banks are increasing the proportion of standardized assets. For example, the standard assets balance of CCB was 905.654 billion yuan, accounting for 43.26% of the total assets, an increase of 11.29% over the end of last year. The balance of investment in bonds by the banks financial management funds was 136.649 billion yuan, and the proportion of investment in bond assets was 63.02%, which was 9.10 percentage points higher than that at the end of last year. The balance of financial capital investment in non-standard assets is 165.313 billion yuan, and the quality of non-standard assets remains stable.

Acceleration of Net Value Transition

ICBC disclosed the performance of its financial subsidiary for the first time. ICBC has not yet fully undertaken its financial projects, but has made profits.

By the end of June, ICBCs total financial assets were 16.112 billion yuan and its net assets were 16.081 billion yuan, and its net profit in the first half of the year was 0.81 billion yuan. ICBC has launched six innovative financial products in three series: enhanced fixed income, mixed capital market and characteristic private equity.

The company said in the Zhongbao that after the opening of the banks financial management, the products that meet the requirements of the new regulations will be transferred to the banks financial management, and the old products that have not expired will be entrusted to the banks financial management operation and management. Recruitment and financial management will focus on fixed income investment, with equity and alternative assets investment as supplementary.

It is expected that the formal opening of the financial subsidiary company will be approved in the fourth quarter. Liu Hui said.

According to the financial report, CCB issued 215 net value products in the first half of the year, with a balance of 343 billion yuan at the end of June, an increase of 43.376 billion yuan over the end of last year. Among the 1.51 trillion yuan of financial products of Agricultural Bank of China, the net value of financial products amounted to 478.181 billion yuan. The average balance of net value financial products increased by 82.638 billion yuan compared with the previous year, accounting for an increase of 8.52 percentage points to 24.04% over the previous year.

Customer acceptance of net value products also needs a process. Liu Hui pointed out that both the sales side and the investment management side of the bank have made some discounts on the cost to support the transformation of cultivating net value products on the basis of large volume and rigid price of current products, which has affected non-interest income to a certain extent. Nevertheless, related income will grow again in the second half of the year and in the future.

Source: Yang Qian_NF4425, Responsible Editor of Economic Report in the 21st Century