How Have Banks' Wealth Management Pivots Played Out In China?

There’s up to $25b in fees to be made in Asia, but it’s a tough market, an analyst said.

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For the last half-decade, whenever it’s time for lenders to make the quarterly or mid-year update on their earnings, you can bet to hear one of three things: lower profits; another restructuring; and the potential of wealth management as the driving force for profitability.

Banks’ hopes in managing the money of the affluent are not without cause. A 2023 report by McKinsey & Co. posits that there is as much as $25b in fees to be made from Asia’s richest.

Success stories, like UBS’ Wealth Management Division generating around US$1.5b in wealth-related fees for the third quarter of 2021, for example, showed promise. From then, that division of UBS would report US$4.97b and US$3.58b in earnings for 2022 and 2023, respectively.

Oliver Wyman’s Jasper Yip told Asian Banking & Finance that there is $200b in global revenue pool for “wealth management (and) corporate and institutional banking” solutions, in particular.

Apart from fees and commissions, banks’ wealth management businesses have also presented themselves as an effective lever to attract stickier funding for their balance sheet, which is particularly beneficial to the higher interest rate environment, Yip said.

But not everyone in the industry is treading the same path.

“Under the current environment, banks need to develop a more resilient revenue portfolio where the longer-term nature of wealth management economics can serve to complement short-term natured businesses like investment banking and sales & trading,” noted Yip, who is a partner and the head of corporate and institutional banking for Asia Pacific at Oliver Wyman.

China’s lustre fading?