A property market crash or a government debt disaster are the most sensational risks facing Chinese trust companies, but they are distant prospects. The most immediate concern for trusts is the growing array of financial institutions moving onto their turf.
Nearly 90 per cent of the trust sector’s revenue is at risk because of this competition, according to a report published late last year by consulting company McKinsey and Ping An Trust.
The first challenge is to their “conduit business”. Apart from making their own investments, trusts have played a crucial role as a conduit through which banks sell assets off their balance sheets.
This business has grown rapidly, accounting for three-quarters of the trust industry’s assets under management. But margins are tiny since trusts are just an intermediary, and securities brokerages are now also serving as conduits, further eroding revenues.
With banks themselves being allowed to do the same, McKinsey and Ping An predict the conduit business will eventually vanish.
The second challenge is to trust companies’ positions as China’s most flexible investment vehicles, and specifically their ability to finance sectors of the economy put off limits from banks. This is volatile, subject to shifting regulatory winds. Moreover, banks, brokerages and mutual fund managers are all now beginning to compete in this same space.
How to confront these challenges? McKinsey and Ping An say trusts should specialise in one of three different areas: boutique investment banking; alternative asset management; or private wealth management.
“Trusts can’t rely on having such a unique license that no one else can play against them. But they have a good starting point, with an existing capability for sourcing assets,” says Stephan Binder, a McKinsey director. “It might be that in 10 years you don’t actually talk about trust companies in China any more because they will have evolved into very different animals.”
据咨询公司麦肯锡(McKinsey)和平安信托(Ping An Trust)去年末发布的一份报告显示，信托行业近90%的收入面临这种竞争的威胁。