Photo/Shetuwang

Dec. 26 (NBD) – Small- and medium-sized banks are gearing up to hunt for strategic investors, as about 26 banks including major state-owned banks and joint-equity commercial banks will or intend to set up wealth management or asset management subsidiaries.

Two regional banks, Guangzhou Rural Commercial Bank and Bank of Chongqing, announced on the same day plans to establish wealth management subsidiaries, with no less than 51 percent stake in the new firm, and the rest will be taken by strategic investors at opportune times.

Experts and securities analysts pointed out that the threshold for setting up asset management subsidiaries is very high, and it is only natural for small and medium-sized banks to actively seek other institutions to set up joint ventures. By doing so, the banks can keep their asset management businesses without injecting too much capital at the initial stage.

Industry insiders maintain that as financial technologies are set to play a key role in wealth and asset management in the future, major fintech companies will be the top candidates for smaller banks to partner with.

Xue Hongyan, director of Internet Finance Research Center at Suning Institute of Finance, said that by technologies like knowledge graph and machine learning, fintech companies can significantly improve the design and risk control of wealth management products. Besides, aided by financial technologies, wealth management subsidiaries can improve operational efficiency via smart customer service and smart recommendations, etc. 

Regarding whether fintech companies will cooperate with smaller banks in wealth management, Meng Zhaoli, dean of JD Digit Research Institute, said it depends on the business strength of banks, the potential of win-win models, and regulatory policies.

Regional commercial banks do have their competitive edges in that they have highly loyal local customers. People in charge of a city commercial bank in Jiangsu Province said that many customers prefer their bank to big banks when choosing wealth management products. The bank can still play an important part in the asset management sector by selling products offered by other institutions.

Yang Rong, analyst with CSC Financial, said that based on the experiences of international major banks, asset management, though not the biggest profit contributor, plays a crucial role in providing integrated financial services and improving client stickiness, thus it is deemed as a core sector by banks.

Smaller banks know grassroots customers well. When the market is more mature and well regulated, and with the help of financial technologies, smaller banks can apply for "customized" products from asset management subsidiaries of major banks or other institutions and sell them to appropriate customers, said president of XWBank, an online bank backed by smartphone giant Xiaomi.

Email: limenglin@nbd.com.cn