Citigroup breaks final private banking taboo
At long last, the disclosure standards for the global private banking industry appear to have been raised. The trendsetter this time is Citigroup Private Bank. Indeed, the bank’s latest presentation on business performance last month should set a new standard for all global private banking operators.
Citi’s “warts and all” approach is refreshing in an industry where it is still considered taboo by many CEOs even to whisper assets under management, yet most acknowledge that the sector seriously lacks data by which to benchmark and differentiate their business models.
Frank figures
Citi is in good company in terms of its openness – both UBS and Credit Suisse have become increasingly frank about their business performance in the field of wealth management. Moreover, Citi’s figures provide an interesting insight into a business that, according to Scorpio Partnership, has consistently posted an increase in quarterly profits during the tough market conditions – a feat not achieved by either of the two Swiss powerhouses.
Crucially, Citigroup Private Bank posted a 15 per cent rise in business volume to $195bn. It is worth noting that this AUM figure refers to client assets in excess of $5m, which is now the stated minimum for the business. Indeed, Citi has indicated that its average account size is $7.1m and it makes on average $70,600 from each relationship – or around 100 basis points. The bank has 25,365 relationships managed by 532 bankers, thus a manager to client ratio of 1:47.
If this is compared to the recognised global market leader on a relatively level playing field there are some interesting comparison points. For instance, in 2003, UBS indicated that 44 per cent of its clientele had assets in excess of SFr5m [$3.6m]. This would suggest that of its total AUM is $218bn for clients in a similar segment to Citi’s core focus. Perhaps then, there is not as much clear space competitively between the Citi and UBS as was thought.
Japan skill key
Interestingly, Citi’s statement also shows that Japan continues to be an important revenue and net income generator for the private bank. Indeed, the bank supports 4197 clients in Japan, compared with 6203 in the US, 4569 in all of Latin America, 3850 in Europe and 6546 in Asia Pacific and the Middle East. In fact, as a force to be reckoned with, Citigroup Private Bank’s Asia (including Japan) client base represents 42 per cent of the global client spectrum. HSBC Private Banking – watch out.
Finally, a question remains over the bank’s relatively low percentage of business volume generated from Europe, which represents just 15 per cent of its overall business. Europe is generally considered to be as large a market in HNW terms as the US. Thus Citi’s UK and Swiss centres should be much stronger forces both in the onshore European context and on the international stage as booking centres for offshore business.
Rude health
Nevertheless, it appears that overall the bank is in rude health and indeed has broadly the same fighting weight as UBS in the $5m-plus segment. Citi’s global regional coverage is enviable even in comparison to the Swiss giant and its underweight position in Europe is relative to the strong international presence. In Scorpio Partnership’s view the European situation is likely to be solvable in the medium term, although it is clearly not the current focus.
As a final comment it is interesting to note that the US house has achieved its wealth management position organically, particularly outside the US, unlike UBS and many other rival houses. A question might be whether Citigroup Private Bank will break from this tradition as it seeks Asian expansion. The recent KorAm Bank purchase may suggest that an acquisition strategy is on the cards.
Sebastian Dovey is managing partner at wealth management strategy
think-tank Scorpio Partnership
