Chinese banks turn to retail amidst tighter scrutiny in wealth

Operating income from the retail arm accounted for 37.56% of total bank income in 2017.

Chinese banks are steadily growing their retail arms amidst a growing customer demand for personalised financial services and products, according to a report from accounting firm EY.

“The income from the retail business contributed to a larger proportion of the total income of the listed banks, as a result of the “big retail” strategy that helped promote the development of consumer finance and housing business,” EY noted.

Pre-tax profit from the retail business as a share in overall pre-tax profit grew from 33.42% in 2016 to 39.02% in 2017.

Operating income from the retail business also accounted for more than a third (37.56%) of total bank income last year.

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A shift in the consumption patterns of customers have led banks to deploy a customised consumer-centric financial ecosystem, where customer, data, channel and technical resources are integrated, the accounting firm pointed out.

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The shift to retail may have been brought about by intensified scrutiny of the banks’ wealth management business as regulators continue to rein in industry malpractice.

In fact, banking assets plunged to single digits from 16.5% to 8.7% for most listed banks last year as loans took over as the growth driver of Chinese banks after clocking in at a stable 12.1%.

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“The implementation of the new asset management regulation in 2018 has posed stricter requirements on the future development and transformation of the wealth management business of banks,” said EY Greater China banking & capital markets leader Kelvin Leung, adding that the reforms will help boost capital measurement, reserve provisioning and information disclosure.