Global Private Banking Awards 2016: Winners’ Profiles – National Winners (Central and Eastern Europe)

Best Private Bank in Central and Eastern Europe
Best Private Bank in Austria
Erste Private Banking

Erste Private Banking is the leading private bank in Austria and in Central and Eastern Europe, with more than 10,000 clients in Austria, and another 9,000 in the Czech Republic, Slovakia, Hungary, Croatia, and Romania. Private client growth has been quite healthy, at 3.5 to 4 per cent, over the past couple of years. 

In the home market of Austria, where private banking manages €13.9bn ($15.4bn), this growth has been based on an aggressive approach to boosting client numbers, including a cold-call strategy using bought contact details for potential clients, and special network events.

The bank has done more than simply try to get new clients, however. It has thought a lot in recent times about the quality of the customer experience. “Supportive and straight organisational structures, a realistic sizing of client numbers for each relationship manager, as well as powerful software environment and training are just a few examples of what’s crucial in order to further increase quality,” says Wolfgang Traindl, head of private banking and institutional clients at Erste Bank Österreich – referring to both Austria and CEE. 

Socially responsible investing and philanthropy have risen in importance in private banking in recent years; in 2015 the bank produced new material showing how socially responsible clients could invest, and how they could engage in philanthropy through the bank’s network partners.

“Interest in this topic started in Austria, but it has gained more and more attention in CEE too,” says Mr Traindl. “Clients are starting to think about their ecological footprint in clothing, driving a car, but also in investments.”

Clients’ biggest challenge? “Our biggest challenge in Austria – and this is also the case in the Czech Republic and Slovakia – is the low interest rate environment, which makes it hard to find low volatility investments 

Best Private Bank in Romania
Raiffeisen Bank

With a presence in more than 15 countries, Vienna-headquartered Raiffeisen Bank International is one of the major banking groups in Central and Eastern Europe (CEE) and Russia. 

The bank’s private banking arm, Friedrich Wilhelm Raiffeisen (FWR), named after the group’s founder, was introduced to the Romanian market in 2012 to cater to local HNWIs. An initial sales force of six
relationship managers was increased to 13 in 2015, with the bank looking to offer customers tailored financial advisory services, based on a guided open architecture framework. 

Back in 2012, 45 per cent of client assets were invested in standard banking deposits but they now tend to have much more diversified and balanced portfolios, in line with their financial goals and risk tolerance. But with interest rates close to zero, a relatively mature bull market in developed equities, an ongoing unwinding of the commodity boom cycle, private investors are having to deal with an extremely difficult investment environment. 

“In this context, we see increased interest from our clients to diversify their portfolios – which currently consist mainly of money market and fixed income related securities – into multi-asset investment strategies that exhibit some form of capital protection or embed risk control mechanism,” says Romulus Mircea, an investment specialist at FWR Romania.

The bank claims it is able to offer a product range covering all major asset classes, regions and investment strategies, either through the Raiffeisen Group itself or third parties financial institutions, which helps differentiate itself from the local competition.

FWR’s main goal going forward is the continued development of its goal-based advisory model. “We analyse the specific circumstances of each customer – starting from a wide range of needs to be achieved potentially through investment – within a comprehensive investment policy statement, and come up with a holistic portfolio recommendation,” says sales director Andra Ion. ES

Best Private Bank in Georgia
TBC Bank

For TBC bank, private banking is all about the combination of old-style relationship management with the new world of digital technology. So while TBC has the largest private banking branch network in Georgia, and offers exclusive lifestyle products and services to its Status clients, it is also trying to move more of its clients into digital channels.

“It is clear that clients prefer to use remote channels due to its ease of use and convenience,” says Vazha Beriashvili, deputy retail banking director at TBC, adding that 72 per cent of all customers’ financial transactions are now carried out in this way.

One of the key aspects of moving into digital banking is to make the processes as simple and convenient as possible for clients, he explains. 

“The biggest challenge of creating a digital product is that you have to incorporate customer feedback into the development phase of the product: you have to show them an initial version of the product first, and then constantly tailor it to their needs and preferences. So every digital product that we offer is always a work in progress.”

As Georgia lagged behind the developed markets in terms of usage of digital services in everyday life, it took significant effort to show computer-unfriendly customers, mostly elderly clients, the advantages of digital services, says Mr Beriashvili. 

“We are following the global trend of mobile-first banking as we seek to make banking digital in Georgia by offering next generation banking services to our customers,” says CEO Vakhtang Butskhrikidze. “It is clear that the customers increasingly prefer to use remote channels due to its ease of use and convenience, and on our part, we continue to focus on delivering the best multichannel capabilities for them.”

The strategy appears to be working. The number of clients was just shy of 13,000 by the end of May 2016, a 20 per cent rise on the year before. ES

Best Private Bank in Hungary
OTP Private Banking 

OTP Private Banking, part of OTP Bank, is present in nine countries across the CEE region, managing €4.9bn ($5.5bn) in client assets. Hungary is by far its largest market, making up 77 per cent of AuM.

In Hungary, OTP Private Banking enjoyed an above-the-market AuM growth of 16 per cent in 2015, increasing its market share to 34 per cent. The main driver of growth was net new money generation of new and existing clients. 

“The robust growth of the Hungarian economy created a pretty favorable environment for the wealth market,” says András Takács, managing director, head of Wealth and Investment Management. “Additionally, relying on our strong brand, we managed to exploit a one-off market situation caused by the wave of bankruptcies of brokerage firms and a struggling banking competition.”

Despite record low interest rates and margins, the bank managed to increase its revenues and profitability. “In a region where the current interest rate level couples with extremely low risk-taking capacity of the clientele, the penetration of more complex investment products with higher margins is more limited, thus we had to find more innovative strategic answers to increase efficiency,” he explains.  

The bank has introduced a package of strategic measures to increase the digital penetration of self-service transaction management, on both the traditional and investment banking sides, freeing up significant adviser capacity. “This has allowed us to rationalise the headcount model, and support our relationship managers to allocate more time to value-added processes,” says Mr Takács.

“In the coming years, we will continue our developments in areas like digital transactions and investment management, remote advisory, and multi-tier service level differentiation,” he adds. PG

Best Private Bank in the Czech Republic
ČSOB Private Banking

While much of Europe has been suffering economically, the story is very different for the Czech capital city of Prague, says Pavel Tichý, head of private banking at ČSOB, with Chinese investors leading the way.

“The Chinese are making investments in businesses, industry and football clubs. They see us as an investment hub, a way into the rest of Europe,” says Mr Tichý. “They are buying up businesses due to attractive pricing. In the Czech Republic, it’s a sellers market and companies are cash rich.”

He talks about a “definite economic prosperity” currently prevailing in his country, with the lowest unemployment in the EU, a scarcity of workers and real wages increasing every quarter, with automotive industries in particular performing well.

“Our recommendation to our clients is to keep calm and keep investing small amounts regularly,” says Mr Tichý, whose bank manages $4.5bn for wealthy investors, who added $250m of net new money during the previous 12 months.

Yet despite this benign economic backdrop, many clients find this sensible advice difficult to follow. “Czechs are always sceptical about the potential of equity markets and bonds,” he says. Everyone who can, either invests in property or expands their own business. People are now much more reluctant to sell their business than one year ago.”

Property investment has been boosted by low interest rates and easily accessible financing. “It is so easy and cheap to get credit and loans,” he says. “The market has been flooded with liquidity and capital, with banks pressured by shareholder to deliver profits.”

For the bank’s private clients, the highlight of 2016 was a visit to Prague of Franklin Templeton’s legendary emerging markets investor Mark Mobius. Templeton is a strategic partner of ČSOB, one of a handful of big brand fund managers to which client assets are directed, alongside Aberdeen, Fidelity and Allianz. ČSOB is also believed to be in discussions with JP Morgan and BlackRock.

“Dr Mobius told our relationship managers and clients to invest if they have the money,” says Mr Tichý, who recommends a 10 to 15 per cent weighting in international equities for Czech high net worth clients, who generally opt for US or European shares.

The days of Czech clients fearing to keep their money at home appear to be in the past, with a much greater faith emerging for local structures among members of the industrial elites.

“Now there is more belief in Czech trusts and domestic structures,” he says. “People are transferring money back to the Czech Republic from offshore structures.”

Clients were very cautious about making investments before the Brexit vote but are now thinking about exploiting post-Brexit opportunities, with the bank experiencing positive net sales to third party products since the referendum, particularly favouring multi-asset absolute return and alternative products. But he also needs to keep looking over his shoulder. Rival player Komerční banka  is fast improving its product range, especially in real estate and private equity, admits Mr Tichý. YB

Best Private Bank in Slovakia
Tatra banka

The private banking arm of Tatra Banka, the Slovakian subsidiary of Austria’s Raiffeisen banking group, dominates its home market, with a 50 per cent share of wealth management. Assets under management have risen greatly from about €400m ($447m) in 2004 to €1.93bn in 2015. During that time, Tatra Banka Private Banking has changed a great deal about itself: both the products it offers and the market it serves. 

Change has been particularly great since 2011, when it implemented a new wealth management business model with three main strands catering to different degrees of risk appetite and different goals. The lowest-risk portfolio, Wealth Immunisation, is designed for managing retirement assets already in the payout phase, funds earmarked for bequest, or money that needs to be safeguarded to pay out for children’s education. The appropriate strategy for this involves eliminating credit and liquidity risks and inflation protection. The Wealth Growth portfolio includes investment strategies that are aimed to deliver real yield and growth of customer assets over time. The Wealth Opportunity portfolio, with a recommended maximum 10 per cent share of total assets, consists of higher-risk investments drawn from funds available after all the goals in the Immunisation and Growth portfolios have been met. 

Innovations such as these have helped the bank improve its customer satisfaction rating progressively since 2012 according to the industry-wide TRI*M Index for Private Banking – a recovery from a sharp drop in that year which the bank blames on customer concerns about the tough market situation of the time. 

Private banking has successfully altered its target market recently, weeding out clients below a certain threshold and focusing on acquiring new clients and increasing the AuM of existing clients. As a result, although the number of private clients has fallen from more than 3200 to 2900 between 2013 and 2015, assets under management have risen by €300m during that time. DT

Best Private Bank in Poland
mBank

mBank began life more than 30 years ago as Bank Rozwoju Eksportu (BRE Bank), changing to its current name in November 2013.

The bank’s private banking arm is working on identifying alternatives to deposits, which are not attractive from a revenue point of view either for the bank itself, or its customers. In 2015, mBank launched a model advisory scheme aimed at making the role of a client’s personal adviser more relevant. The plan is to allow those customers with a smaller proportion of their assets allocated to investments rather than on deposit to test the waters and build up small portfolios. 

The bank is determined to continuously improve the qualifications of its relationship managers, running a programme which prepares its advisers for the European Financial Planner exams. mBank currently employs 58 client-facing staff, servicing just under 6000 private clients.

Potential customers are mainly acquired from recommendations from existing customers, personal contacts of private banking advisors, and marketing and PR activities. In 2015, an emphasis was placed on cooperation with the wider mBank group, Poland’s fourth largest bank in terms of customer numbers, to expand its wealth management operations. 

A major challenge for the financial industry in Poland has been the country’s new banking tax, which is calculated on the basis of a bank’s assets. Since mBank’s customers have fewer loans, the impact of this has not been as severe as for some other firms. For example, the banking tax applies also to insurance companies, and has made a number of their products unprofitable. Some decided to withdraw low margin products from the market, and mBank responded by changing the formula and transforming some of their unit link products into investment funds. 

The hope is that in the long run this should have a positive impact on revenues, since the variable costs associated with investment funds in relation to unit links are lower. ES