Recently, some banks and wealth management subsidiaries have experienced net losses in their net worth products.

Can bank wealth management products be "stable"?

Economic Daily · China Economic Net reporter Guo Ziyuan

  Recently, the annualized returns of net worth wealth management products issued by some banks and wealth management subsidiaries have rarely fallen to negative numbers in the past month. At the same time, some customers filed complaints about the plunge or loss of purchasing low-risk bank wealth management products-industry insiders believe that this is mainly due to the impact of bond market adjustments, but also related to the adjustment of wealth management product valuation methods, and short-term negative book earnings It does not mean actual negative returns, investors should be treated rationally.

  Recently, many investors have discovered that the bank's wealth management products have experienced floating losses. According to incomplete statistics, more than a dozen banks and dozens of wealth management products have recently exhibited negative annualized returns, and unit net value and cumulative net value have both declined. Other customers filed complaints about the loss of purchasing low-risk banking wealth management products.

Are bank wealth management products known as "stable"? Why is the net worth floating at a loss?

  In this regard, many industry insiders said that the "Guiding Opinions on Regulating the Asset Management Business of Financial Institutions" (ie, "New Asset Management Regulations") has been published for more than two years since April 2018. Breaking the rigid payment, you must not promise to protect the capital and income. Subsequently, according to regulatory requirements, bank wealth management opened the road to "net worth" transformation, that is, net worth management, no expected rate of return, fair value calculation, and regular opening.

  In this context, since April this year, the bond market has undergone shock adjustments, and pure debt bank wealth management has inevitably experienced a net worth floating loss; in addition, with the transition period of the "asset management new regulations" is about to usher in the end, before The "amortized cost method" has gradually been abandoned, and new wealth management products mostly use the "fair value valuation" algorithm that meets regulatory requirements. Under this algorithm, the net value of wealth management products is more prone to fluctuations.

  Therefore, when bank wealth management breaks rigid payment and no longer guarantees principal and interest, floating net loss of products is a normal phenomenon under short-term market fluctuations. Investors should be rational about this.

 Multiple net worth products "floating losses"

  In response to the recent news that some of the net worth products of some banks and wealth management subsidiaries suffered a loss of principal, a reporter from the Economic Daily reported on the China Merchants Bank Mobile Banking App and found that as of June 16 The financial product titled "Consignment Quarterly Kai No. 1" has an annualized return of -4.42% in the past month. The net unit value as of June 10 was 0.9988, which fell below 1. In addition, the bank's other "Ji Ji Kai No. 2" wealth management products also fell below 1 in net worth. The official website information shows that as of June 10, the unit net value of the product is 0.9994, and the annualized return rate since its establishment is -0.73%.

  Specifically, the above two products are fixed-income products, which are open regularly and open every three months. 100% of the main products are invested in fixed-income assets. They do not participate in the stock market. They accumulate coupon income and choose transactions according to market changes.

  It is not only China Merchants Bank that has recently experienced a net loss in wealth management products. The reporter found that the net worth wealth management products of Industrial and Commercial Bank of China, China Construction Bank, China CITIC Bank and other institutions have also experienced floating losses, such as "CCB Financial Ruixin holds a minimum of 90 days to open the second phase" products, as of June 16. The latest net value is 0.999775. From the perspective of investment scope, investment in cash assets and fixed income assets accounts for more than 80%. From the perspective of risk level, the above products all belong to low and medium risk levels, namely R2 and R3. "That is to say, investors should not link the net worth floating loss to a high risk level, and the two are not necessarily related." A person in charge of the personal financial business department of a joint stock bank said.

  "The financial products with floating losses recently are mainly affected by the adjustment of the bond market, and it coincides with the opening period for the purchase and redemption of the product. If investors redeem at this time, they may lose their principal." Rong 360 Big Data Research Institute Analyst Yin Yanmin said.

  Yin Yanmin said that in accordance with the requirements of the "New Asset Management Regulations", bank wealth management is gradually transforming from expected-income products to net-value products, and the product operation model has also changed from the original closed type to open or regular open products that can be redeemed at any time.

  Therefore, if the investment target of a wealth management product is dominated by fixed-income assets, then it will be more similar to a bond-type public fund, and its net asset value will fluctuate somewhat with market changes; however, compared with bond-type public funds, the current The retreat of pure debt bank wealth management is relatively small.

  Valuation method "changing"

  It is worth noting that the changes in the bond market are only one of the reasons for this floating loss, and more importantly-according to regulatory requirements, the valuation method of net worth wealth management products has undergone new changes. The "surplus cost method" becomes "fair value valuation".

  What is the difference between these two valuation methods? Why make adjustments? How will the new method affect the net worth of bank wealth management products?

  "The so-called "amortized cost method" is a method of valuation of financial assets, which will hold the interest due due to each interest payment date." The relevant person in charge of the China Banking Association said that this method does not use Asset pool model to respond to investors' high-frequency redemption needs.

  However, as the transition period of "new asset management regulations" is about to come to an end, the "amortized cost method" that can be used during the transition period has gradually been abandoned, and new products mostly use "fair value valuation" that meets regulatory requirements. Among them, the "Measures for the Supervision and Management of Wealth Management Business of Commercial Banks", that is, the "New Financial Management Regulations" clearly requires that wealth management products be net worth management, and the principle of "fair value valuation" should be adhered to, and the investment of assets measured by market value should be encouraged.

  "Wealth management products evaluated by fair value valuation are called "true net worth" products in the industry." The relevant person in charge of the personal financial business department of the above stock bank said that the reason why it is called "true net worth" is because the valuation method makes The net worth of wealth management products and market prices are closer.

  But at the same time, there is also a "problem" in "fair value valuation", which will make the net value of wealth management products fluctuate greatly, especially when the market is in a state of large shocks, the net value of wealth management products valued using this valuation method The volatility will be far greater than the wealth management products valued using the "amortized cost method", and even under certain circumstances, there will be a net value loss.

  Nevertheless, why do regulators still guide commercial banks to adopt "fair value valuation"? Industry insiders said that this method can greatly reduce the risk of rigid payment.

  "For a long period of time, the bank's wealth management was'deposited', and the implicit pressure was relatively high." Shang Fulin, member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference and director of the Economic Committee, said that the traditional deposit and loan business of banks is the relationship between debt and debt, and asset management. The industry is more of an entrusted agency relationship or a trust relationship, that is, "trusted by a person, managing money on behalf of a client".

  Therefore, only by breaking the exchange can we better promote the bank's wealth management to return to the business root of "trusted and managed by the client", pass on the investment philosophy of "the seller is responsible and the buyer is at his own risk", and then effectively prevent the solution Financial risk.

Net value fluctuations will become the norm

  Faced with the above floating loss phenomenon, how should investors understand the response? Many industry insiders said that the net worth transformation of bank wealth management products is the general trend and is also a regulatory requirement. As this process continues to advance, the frequency of floating losses may become higher and higher.

  The report released by Puyi Standards shows that the net value transformation of various types of bank wealth management products has shown a steady increase from the second quarter of 2019 to the first quarter of 2020. Among them, the proportion of the remaining balance of net worth products accounted for the size of all non-guaranteed wealth management products, has risen from 36.7% in mid-2019 to 52.45% in the first quarter of this year.

  The recent floating losses of pure debt bank wealth management products are a normal phenomenon under short-term market fluctuations, and investors need not panic.

  "There are negative returns on individual products of wealth management subsidiaries. This is a rare'stress test' opportunity. If investors can be successfully promoted to break the reality of just exchange, it will significantly promote the extension of the subsequent wealth management subsidiary product line and the allocation of risk assets. "Qiao Yong, a researcher at Industrial Research, said forever.

  Because the net worth products got rid of the operation mode of the capital pool, the characteristics of the bank's wealth management in the past "higher returns, higher liquidity, no risk of redemption" are difficult to maintain. In addition, if the “amortized cost method” and the “return-to-earnings model” are followed, bank wealth management products may be limited to the “low-yield-quotation-based” range, which will make it more difficult to meet investors’ medium- and long-term wealth preservation and appreciation needs. .

  "Breaking rigid payments, investors take risks, but will also enjoy dividends." Joe always said that next, interest rate levels may remain low for a long time, and wealth management products need to expand asset allocation in order to obtain higher returns. Borders to obtain a risk premium, but this requires a certain short-term volatility risk.

  Guo Ziyuan