Spotlighting success in private banking

As PWM’s Global Private Banking Awards celebrate their fifth year and numbers of entrants continue to grow – this year we received submissions from 103 banks – several new patterns are emerging or being amplified.

More than 22 per cent of participating private banks in 2013 are new entrants, many of them onshore wealth managers specialising in growing domestic markets such as Mexico, the Czech Republic, South Africa and Indonesia.

All of our nine judges point to a major trend of regional institutions in the ascendancy, building strong private banking imprints not just in their home country, but in neighbouring nations. This means leveraging existing retail branch infrastructure for higher wealth segments.

These rising “onshore giants” include ABN Amro, triumphing on home territory in the Netherlands, but also recognised for private banking efforts in France and Germany; BNP Paribas, best in both Belgium and France and also for socially responsible investing and philanthropy services; and Hungary’s OTP, all conquering not just on home soil, but also in the broader Central and Eastern Europe region. US and global banks, on the other hand, once keen to sow private banking seeds far and wide, appear to be retrenching.

“This year marks a watershed in the evolution of wealth management, with some big institutions rebalancing their commitment to the segment,” agrees Seb Dovey, whose Scorpio consultancy screens quantitative data for the PWM awards. He particulary draws attention to restructures at Bank of America Merrill Lynch and a “reduction of market commitments by HSBC and Credit Suisse”.

But it is the ascendancy of the domestic players which most captures his attention. “There is clear evidence of the rising number of domestic operators in countless markets vying for market share and on the fast track of growth,” says Mr Dovey. “Typically, they are starting from a stronger retail franchise base, but they are capitalising on this much better than they have in the past.”

The deep international footprint which US groups had for decades in private banking is clearly fading fast. “Most of these groups have disengaged from Switzerland and Europe and focused instead on their retail and commercial banking activities,” says Shelby du Pasquier, co-head of the banking and finance division at Geneva law firm Lenz & Staehelin.

Following the restructure of the US banking sector, with the notable exceptions of JP Morgan and Citi, most groups active in the area have been sold or taken over, with the sale of the Merrill Lynch non-US wealth management activities to Julius Baer the latest manifestation of this trend. But do not expect US players to die a sudden death as wealth managers. “They are still in the restructuring phase, so I would not rule them out at all,” warns Ray Soudah, founder of Swiss M&A consultancy MilleniumAssociates.

Large banks everywhere increasingly regard their private banking arms as strategically important, believes Amin Rajan, chief executive of the Create-Research consultancy. “But that emphasis is greater in Europe than the US. As European banks have scaled back their investment banking business, their wealth management arms have acquired greater significance.”

The prime beneficiary of these changes is a resurgent UBS, where private banking is once again becoming the core of the business, helped by a fast improving brand name, following extreme post-crisis difficulties, combined with a scale-back in capital markets activity.

Even though UBS has scooped four awards in 2013, including the overall Best Global and Best Asian Private Bank categories, our judges believe there is much more to come from the Zurich giant, which could sweep the board, once it makes real efforts towards restructuring instead of “baby steps”. The same is also true of key competitor Credit Suisse.

Other Swiss banks will suffer unless they buy into this new era of industry practices, now that the protectionist advantages have come to an end. “A new model is emerging, which can still benefit from the safety and skills available in Switzerland,” confirms Mr Soudah.

Those banks already devoted to improving their wealth management service and re-inventing themselves with the times – Pictet and Julius Baer being perfect examples – will continue to prosper, agrees the panel.

But ignorance of client needs is still widespread across private banking, believes Scorpio’s Mr Dovey, who conducts regular research of customer perceptions. “What remains an issue of concern is the widespread lack of sustained innovation and respect for R&D in the client experience among the wealth management industry. The submissions continue to show the banks are just scratching the surface of customer engagement.”

This said, the improvement in submissions in onshore markets, particularly in developing countries of Latin America, Asia and Eastern Europe has been marked, with a real battle for honours now taking place in Russia, China, Thailand, Malaysia and Mexico. Simeon Fowler, partner in recruitment consultancy Fowler Fox & Co, particularly keen to recruit bankers in both China and Indonesia, expects onshore standards to continue to improve as the old offshore private banking model dies out. “As more banks get their licences in China, we will see many offshore, skilled, senior private bankers returning to China and this will lead and help grow and develop the current talent pool,” he says.

Asian players in markets such as Singapore and Malaysia are also expected to continue gaining in expertise and offer their services across borders in highly populated areas, with the likes of DBS, Standard Chartered and Malaysia’s CIMB and Maybank potentially set to benefit. “Asian regional players are gaining more confidence in their ability to go head to head with the global banking brands,” says Justin Ong, asset management leader at PwC in Singapore.

“Asian banks have the advantage of local market knowledge and reach, and their brands remain strong pull-points within their own countries and nearby regional markets.”

The judges:

Yuri Bender, Editor-in-Chief, Professional Wealth Management, based in London, UK

Seb Dovey, Partner, Scorpio Partnership, based in London, UK

Shelby du Pasquier, head of Banking and Finance Group, Lenz & Staehelin, based in Geneva, Switzerland

Simeon Fowler, CEO, Fox Partnership group of companies, based in Singapore

Stefan Jaecklin, CFA Partner, Head Wealth and Asset Management

Justin Ong, Partner, PricewaterhouseCoopers, based in Luxembourg

Alois Pirker, Research Director Wealth Management, AITE Group, based in Boston, USA

Amin Rajan, CEO, Create-Research, based in London, UK

Ray Soudah, Founder, MilleniumAssociates, based in Switzerland