ČSOB heads to Czech regions to seek trust of new clients

Following on from recent “blanket coverage” of the high net worth community of Prague, the Czech Capital, the country’s most prominent private banking franchise, ČSOB, is spreading its focus to the regions.

One of the key weapons the bank will be using, according to Wealth Office director , is the offer of trust services, following changes to the Czech civic code. Previously, such fiduciary solutions were only available to clients using offshore trusts or law firms.

There are clearly some inherent risk factors in this line, which is the reason many European banks are pulling back from trust provision, but Mr Tichý believes the business will eventually pay dividends.

“There is always room for mis-interpretation, as this is a new experience and both sides [clients and providers] are worried about it,” he cautions. “But the past seven years’ experience of our industry, shared by regulators, providers and custodians, has been a positive one.”

The legal changes have allowed assets to be repatriated from offshore structures, so they can be put back to work in the local economy. “We lost some of the market to private boutiques who helped clients set up hidden accounts in Switzerland,” concedes Mr Tichý. “But we don’t want to compete in that area.”

He is encouraged not only by the flows of money coming home, but by the fact that since the crisis, there appears to be a desire among private clients to consolidate holdings across one or two names, rather than a handful. Nevertheless, the discreet nature of investment structures, linked with succession planning and generational transfers, remain among top concerns of Czech private clients, just as across Europe and Asia.

“People who are really rich don’t want to attract any attention, but they want to see good performance of their portfolios,” says Mr Tichý, overseeing a renewed push in private banking. ČSOB increased its scale after buying the troubled Investiční a Poštovní Banka in 2000.

Today’s resurgent climate co-incides with a revival in the country’s M&A market, sparking the creation of a new wave of entrepreneurial wealth, he says. “Two years ago, no-one else wanted to compete in this market,” he shrugs. Now the Czech Republic represents a new outpost for Europe’s private banking operators, as well as domestically-schooled competitors.

ČSOB effectively breaches both groupings, as an autonomous subsidiary of Belgian bank KBC, although often receiving a little friendly advice from its parent when it comes to devising investment products. Subsidiaries in Belgium, Hungary, the Czech Republic and Slovakia “all belong to the private banking community,” he says, with the appointment of Johan Thijs as CEO of KBC adding a new, modern impetus to a business previously dominated by the influence of traditional Flemish families.

“Our colleagues in Belgium have opened their doors to us,” reflects Mr Tichý, particularly keen on the new product menu, consisting of both internally and externally sourced vehicles, now made available to his private bankers. These include a range of credit-linked notes, secured bonds and baskets of equities.

He is also a big fan of European regulations, including Mifid, which he says help to facilitate the provision of suitable products provided by external partners. His team are just beginning to sell funds to clients, managed by big brand names including Templeton, Pictet, and BlackRock.

The process has been a slow one and the progressive Mr Tichý is not shy to admit this.  “We have learned from our clients, as we were the last bank to open up, due to our sharedholders’ policy and the risk approach of the group,” he admits, falling behind competitors including UniCredit, Komerčni Banka and Raiffeisen.

“We are gradually expanding the number of partners,” he adds, although it can indeed be difficult to tempt big-name managers onto the ČSOB platform. “They are quite frank and open with us. They say they like us, but it isn’t worth their while having an agreement with us and registering with the Czech National Bank if we can’t guarantee the flows.”

This is a problem common to all Czech banks, he believes. “Scale can be found in Austria, Germany and Poland, not in the Czech Republic.”