Ping An Bank structured products offering increases despite deposit curb

Ping An Bank has posted a 2.6% increase of net profit at CNY28.9 billion (US$4.5 billion) in the 2020 year-on-year (YoY) despite the continued fall of structured deposits issuance, while its new subsidiary, Ping An Wealth Management, derived a net profit of CNY165m.

The bank’s retail business remains the main driver of net profit, making up 61.1% while the wholesale business represents 14.1%.

Operating income increased by 11.3% to CNY153.5 billion YoY, but that growth was largely offset by the rise of operating expenses at CNY46.2 billion and impairment losses on credit and other assets at CNY70.4 billion in 2020.

Opened for business on 28 August, Ping An Wealth Management is in the process of taking over the public and private WMPs including structured products from its parent bank as the bank carries out the ‘new asset management regulations,’ which were released mid-2018 with a grace period till the end of 2021.

The wholly-owned asset management arm with a registered capital of CNY5 billion recorded total assets of CNY5.43 billion and net assets of CNY5.17 billion as of the end of 2020.

Throughout 2020, Ping An Bank offered ‘more net value based products (‘new products’) that are in compliance with the requirements of new asset management regulations, such as fixed income+, hybrid and structured products, and implementing FOF (fund of funds)/MOM (manager of managers) product strategies to form a relatively complete product system,’ stated the bank in its 2020 annual report.

A total of 1,621 new products, which are not principal-guaranteed as required, were offered in 2020. They were sold at CNY4.4 trillion and booked off-balance sheet.

In the meantime, the Chinese bank continued to reduce the issuance of principal-guaranteed WMPs, known as ‘old products,’ whose balance was down 44.6% as of the end of 2020 YoY. That level ‘outperforms other national joint stock commercial banks,’ according to the report.

The notional volume of interest rate swaps and foreign exchange derivatives climbed by 12.4% to CNY103.8 billion in 2020 compared with a year ago.  

Ping An Bank reduced the issuance of structured deposits throughout the year, which were principal-protected and booked on-balance sheet, as some clients turned to other deposit instruments instead, such as time deposits and certificates of deposits.

The move was part of the bank’s efforts to lower its debt liabilities, which also included a strict control of new deposits pricing, under a series of policies targeting structured deposits. 

As of the end of 2020, the balance of retail deposits was up 17.3% to CNY684.7 billion, of which demand deposits amounted to CNY242.3 billion, an increase of 21.2% YoY.

Structured deposits

The balance of structured deposits for China’s small-medium state-owned banks including Ping An Bank fell by 37.8% to CNY3.9 trillion as of the end of 2020 YoY. As a whole, the group has met the requirement to decrease the balance to two-thirds of the level recorded at the end of 2019, as previously reported.

SRP database shows that Ping An Bank, a subsidiary of Ping An Insurance Company of China, is among the top players of structured deposits in the country.

The bank issued and distributed 2,538 structured deposits from January to May 2020, of which 2,211 for corporations, 309 for retail and 18 for private banking clients. Daily range accrual and digital call or put were the most used payoffs while dozens of products were deployed with autocall, bull sharkfin or step-up digital.

New issuances in 2020 include 1,354 products linked to the performance of EUR/USD while 1,002 products were linked to Libor 3M. The remaining were tied to the performance of AU9999, CSI 300, Loan Prime Rate or GoldLNPM.

The bank’s best-performing product during the period is 平安银行对公结构性存款（100%保本挂钩汇率）2020年0059期人民币产品, which delivered the highest annualised return of 6.1% pa with a one-month tenor. The digital call deposit for a corporate client was linked to the performance of EUR/USD and sold at CNY1m.