Chinese Banks Accelerate Shift from Principal-Guaranteed to Net-Value Wealth Management Products

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Chinese banks are accelerating their shift away from principal-guaranteed wealth management products (WMP) to net-value WMP’s over a year after Beijing’s banning of “implicit guarantees” for the instruments.

As of the end of the second quarter 395 commercial banks (not including foreign invested banks) had 100,811 outstanding WMP’s, for a decline of 5905 compared to the end of the first quarter of 2019 according to data from PY Standard.

The outstanding WMP balance was estimated to be approximately 27.68 trillion yuan, for an on-quarter decline of 4.91%.

As of the end of the second quarter there were a total of 34,813 outstanding principal-guaranteed WMP’s, for an on-quarter decline of 14.19%, while the outstanding principal-guaranteed WMP balance was estimated to be 2.66 trillion yuan for an on-quarter decline of 35.08%.

The number of outstanding non-principal guaranteed WMP’s was 65,998, for an quarter-decline of 0.22%, while the non-principal guaranteed WMP balance was 25.02 trillion yuan, more or less on par with the reading for the end of the first quarter.

As of the end of the second quarter there were 9494 outstanding net-value model WMP’s, for an on-quarter increase of 16.36%.

As of June 2019 the National Bank Net-value Transition Index (国银行净值化转型程度指数) was 6.09 points, for an increase of 4.57 points compared to the same period last year.

PY Standard analyst Wei Jiyao (魏骥遥) said that some Chinese banks were slowing down the pace of their WMP issuance, while many were also shifting their focus from external expansion towards internal structural adjustments.

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