Entering the hall, there is a set of Chinese-style rosewood
chairs. Around a classic wood screen, a comfortable waiting area
awaits, complete with white sofas, traditional Chinese landscape
paintings and a gramophone in the corner.
Welcome to Bank of China's two-month old private banking branch
in Beijing, the first of its kind in the country.
The private banking service is targeting high-net-worth
individuals who require personal wealth management services. The
bank, which is 4.4 percent owned by Royal Bank of Scotland, will
cater only to individuals with over US$1 million to invest.
"Business has been going well," says Wang Lei, general manage of
BOC's private banking sector.
According to Wang, on the opening day, the outlet received some
20 clients.
"Private banking has huge room to grow as the country's rapid
economic growth creates an increasing amount of rich customers who
are starting to think about financial asset management," he
says.
In a recent Barclays Capital survey of 73 wealth managers around
the world, over 80 percent forecast at least 16 percent annual
growth in assets under management in China.
A report by Boston Consulting Group said nearly 300,000
households in China hold net investment assets worth more than US$1
million.
China is one of the fastest-growing wealth management markets.
Assets under management are expected to double by 2010.
Li Lihui, president of BOC, is confident about the business
potential. "We expect to develop 10,000 clients in one year, with
an ideal target of 50,000 in the initial stage," Li said.
The bank expects the private banking business to drive growth of
its intermediary services and retail business, and it hopes it will
become a new profit source in one to two years.
Other Chinese banks are going to follow suit.
Tang Zhihong, vice-president of China Merchants Bank, announced
at a meeting with clients that it will launch private banking
services later this year to meet the demands of its high-end
customers.
The service will open to clients with 5 million yuan of assets
to invest.
China CITIC Bank, which recently listed in Shanghai and Hong
Kong, also plans to open private banking services in the latter
half of 2007, with an entrance requirement of US$1 million.
Foreign banks are also eyeing China, one of the largest untapped
markets for private banking in Asia.
Standard Chartered announced on May 28 that it will launch
private banking in Shanghai and Beijing in June, followed by Hong
Kong, Singapore, Seoul and London.
The Netherlands-based ING is also considering launching private
banking services, either in cooperation with its local partner,
Bank of Beijing, or by itself after it's registered as a local
entity.
Although China just opened renminbi business to foreign-invested
banks recently, many of foreign financial giants, including AIG and
Deustche Bank, have opened private banking offices in the last two
years as an investment for the future.
"There's a 2:8 principle in banking sector. That means 20
percent of high-end customers bring about 80 percent of the bank's
revenue. It's the major reason that private banking will become a
main focus of competition among Chinese and foreign banks," said Li
Yongsen, a professor at Renmin University of China.
In Europe, the average profit margin is as high as 30 percent
for private banking businesses, said Guo Tianyong, a banking expert
at Central University of Finance and Economics.
According to Guo, foreign banks have more experience in private
banking, while Chinese banks have the advantage of well-established
client bases.
(China Daily June 6, 2007)