|Posters of fund companies are displayed at a financial exhibition in Shanghai early this year. As Chinese investors snap up mutual funds, many domestic banks have stepped up their agency businesses to cash in on the boom. [newsphoto]
As Chinese investors snap up mutual funds, many domestic banks have stepped up their agency businesses to cash in on the boom.
Bank of China's commission income increased 71.96 percent to 11.76 billion yuan (US$1.56 billion) in the first half of this year. Among such income, fees from the sale of mutual funds surged 143.25 percent to 2.2 billion yuan.
"The fast-developing capital market helped the bank's sales fee to rise, especially those from selling mutual funds," the bank said in its latest interim report.
Bank of China posted a 47.94 percent increase of its after-tax profit to 32.73 billion yuan in the first half of this year.
China Construction Bank also posted a surge in net commission fees of 101.79 percent to 12.6 billion yuan. Posting a 59.26 percent increase in after-tax profits to 2.55 billion yuan, Shanghai Pudong Development Bank said its income from intermediate services rose 50.69 percent to 634 million yuan from January to June.
The Industrial and Commercial Bank of China, the mainland's largest mutual funds custodian bank, posted an 89 percent increase in its income from commission fees to 14.87 billion yuan.
"The expansion of mutual funds custody scale contributed a lot to the bank's profit growth," said the bank in an interim report. "The increase also showed the bank is continuing to develop the intermediate services."
Banks benefit from mutual funds business on two main income streams: custody fee and sales agent fee. The custody bank is often the sales agency of a mutual fund. The fee rate needs to be negotiated between banks and mutual funds. The custody fee is usually around 0.25 percent and sales agent fee around 1 percent.