China Securities Co., Ltd. 2025 Bank Wealth Management Market Outlook: Incremental policies stimulate the entry of wealth management funds into the market, and regulatory policies will continue to optimize product structure.

China Securities Co., Ltd. released a research report stating that by 2025, the supervision of wealth management will expand the boundaries of wealth management funds entering the market. It is expected that the scale will increase by about 15% in 2025, reaching 35 trillion; during the low interest rate and rising asset price cycle, the proportion of cash and bank deposits in asset allocation will decrease while the proportion of public funds and equity assets will significantly increase, and the proportion of bonds will change with the times; the average performance benchmark will stabilize, with an expected increase of 20-90 basis points, reaching 3%-3.7%; the scale and quantity of mixed and equity products in the product structure will increase significantly, with an expected increase in proportion, predicting that in the future, whether on the liability side or the asset side, the scale of wealth management funds entering the market will be roughly between 2-3 trillion. The main points of China Securities Co., Ltd. are as follows: The impact of the "comprehensive increment policy" on bank wealth management. On September 24, the Central Bank made comprehensive adjustments to the monetary policy target, for the first time incorporating changes in asset prices into the monetary policy target, with main policy tools being SFISF and repurchase and refinancing loans for shareholders. Subsequently, the "comprehensive increment policy" was successively introduced, and the overall macroeconomic policy environment shifted to a main focus on low interest rates and rising asset prices. The impact and transmission of the "comprehensive increment policy" is currently mainly focused on the capital market, bank securities and fund industry, as well as the real estate market and macroeconomics, and the impact on bank wealth management is mainly achieved through the transmission and implementation in the liability side, asset side, and product side. The short-term impact on bank wealth management is mainly increased market risks; facing downward pressure in wealth management performance benchmarks; increased redemption risks, with the risk of shrinking wealth management scale; the need to issue more mixed and equity products; the need to increase the proportion of equity assets in wealth management assets. The medium and long-term impact on bank wealth management is mainly accelerating the development of equity businesses; increasing investment in equity assets; increasing the return on wealth management investments, increasing residents' property income, sharing the dividends of economic growth; promoting the high-quality development of the wealth management industry. Outlook for wealth management funds entering the market. The "comprehensive increment policy" directly related to wealth management is: smoothing the channel for entering the market and attracting medium and long-term funds to enter the market. The main bottlenecks for wealth management funds entering the market are: client side: face-to-face signing system leads to mismatches between wealth management products and customer preferences; channel side: can only be sold through bank channels; product side: limited number of mixed and equity products. The main paths for wealth management funds to enter the market are: diversifying product types: gradually increasing equity products, including: index equity products, enhanced index equity products, stock products, multi-asset mixed products; purchasing public funds; direct investment in stocks. Prospects for wealth management business at small and medium-sized banks. In order to achieve high-quality development of the wealth management industry, wealth management business at small and medium-sized banks faces certain adjustment pressures. 2025 is a year of transformation for the wealth management industry. It is expected that regulatory policies will undergo significant changes, including regulatory policies on the wealth management business of small and medium-sized banks, and it is expected that a portion of wealth management sub-licenses will be appropriately issued, primarily benefiting larger-scale wealth management at urban and rural commercial banks. In the first half of 2024, the wealth management balance of small and medium-sized banks was 3.19 trillion, accounting for 11% of the total, with a total of 211 institutions. It is projected that if around 20/15 new wealth management sub-licenses are issued in the future, the wealth management scale of urban and rural commercial banks converted to wealth management sub-licenses is estimated to be around 2/1.5 trillion, with a natural need to reduce the wealth management scale by 1.2/1.7 trillion or more, requiring the number of transformed institutions to reach 191/196. If around 5 wealth management sub-licenses are issued in 2025, the number of wealth management sub-licenses at urban and rural commercial banks is expected to significantly increase. Based on the above calculation, it is estimated that by 2025, around 0.6/0.8 trillion of wealth management scale will need to be reduced, and nearly 100 institutions will need to gradually exit the wealth management market. Four turning points in the development of bank wealth management business in 2024. First, in February 2024, the turning point in the number of mixed products issued, with the lowest proportion of mixed products in February and subsequent increases; Second, in March 2024, the turning point in residents' risk preferences. In March, the index of residents' risk preferences reached a low point and then slowly began to rise from the low point; Third, in April 2024, the turning point in wealth management scale. In April, the wealth management scale began to steadily increase from a low point; Fourth, in the second quarter of 2024, the turning point in asset allocation in wealth management. Starting in the second quarter, the proportion of cash and bank deposits in wealth management allocation began to decrease, while the proportion of public funds began to rise. Turning points in USD wealth management products in 2024. First, the number of USD wealth management products began to decline after peaking in September. Second, the benchmark performance started to decline after peaking in July. Third, the risk index rebounded after hitting a low in August. Characteristics of sample wealth management products in the first 10 months of 2024. First, the number of issuances: significantly increased, with a steady increase in monthly issuances, a higher proportion of mixed products, and continued market concentration. Second, the benchmark performance: continued to decline, reaching 2.73% in October, a decrease of 60 basis points from the end of last year, with a greater decrease in mixed products. Third, risk level: after hitting a low in March, it began to slowly rise. Fourth, term structure: the basic structure remained stable, with a proportion of 70% for terms of less than 1 year and 30% for terms of 1 year or more, but the proportion of T+0 products is increasing. Outlook for the wealth management market in 2025: a year of transformation. First, regulatory policies will expand the boundaries. Along the main line of wealth management funds entering the market, the policy boundaries of wealth management industry supervision will gradually expand, and regulatory policies will relax somewhat. It is expected that in 2025, the regulatory requirement for clients to sign face-to-face for purchasing PR4-PR5 wealth management products may be cancelled, allowing wealth management products to be sold through internet channels, and may continue to expand to allow securities firms to sell wealth management products, and insurance asset management agencies may also be allowed to purchase wealth management products; meanwhile, relevant policies to promote the entry of wealth management sub-funds into the market will also be gradually introduced. Second, scale forecast: Based on regulatory policies, industry factors, resident preferences, and the increase in wealth management product returns, it is expected that the scale of wealth management in 2025 will increase by around 15% year-on-year, reaching around 35 trillion. Third, structural changes in asset allocation: It is expected that 2In 2025, during a period of low interest rates and rising asset prices, in the asset allocation of wealth management, the proportion of highly liquid cash and bank deposits decreases, while the proportion of public funds and equity assets will increase significantly; if the bond market performs well, the proportion of bonds will also increase, but conversely, if the bond market is volatile, the proportion of bonds will decrease.Fourth, performance comparison benchmark: stabilization after decline. With the adjustment of asset allocation structure, the performance comparison benchmark will stabilize after the decline, and the expected increase will be between 20 bps and 90 bps, reaching 3%-3.7%. Fifth, product structure: By 2025, the regulatory policies of the wealth management industry will accelerate the entry of wealth management funds into the market. It is expected that the structure of wealth management products will undergo significant changes, with the scale and quantity of mixed products and equity products both significantly increasing. If the wealth management scale increases by 5 trillion yuan in 2025, with fixed-income products increasing by 3 trillion/2 trillion yuan, mixed products increasing by 1 trillion/1.8 trillion yuan, and equity products increasing by 0.6 trillion/1.3 trillion yuan. From the perspective of wealth management balance, out of 35 trillion yuan in scale, the proportion of fixed-income products/mixed products/equity products will be 92%/6%/2%; or 88%/8%/4%. The product structure will continue to optimize, with a significant increase in the proportion of mixed and equity products by 6%/14%.