Asia 2017 AUM League Table
Boom year for Asia’s private banks as Top 20 AUM surpasses US$2 trillion in 2017
A sustained market rally and robust client activity in 2017 translated into a year of gains for Asia’s private banks, whose combined assets under management (AUM) – excluding China onshore – surged past US$2 trillion for the first time.
Asia (ex-China onshore) AUM (US$ billion)
Note: December 31, 2017 spot rates used to convert non-USD reporting currencies. CHFUSD: 1.026; SGDUSD: 0.748; EURUSD: 1.200
The record-high AUM total of US$2.01 trillion marks a year-on-year (YoY) increase of 29%, and the second consecutive year that Asia’s Top 20 private banks have increased their combined AUM after a drop in 2015.
The Top 5 grouping of UBS Wealth Management, Citi (incl. Gold, Private Client and Private Bank), Credit Suisse Private Banking, HSBC Private Banking, and Julius Baer remained unchanged in composition and ranking, with their combined AUM of US$1.08 trillion representing around half of the Top 20 total. UBS Wealth Management extended its lead at the top of the table with US$383 billion at the end of 2017, adding just under US$100 billion to its APAC book – equivalent to a mid-to-large-scale private banking business in Asia – including US$29 billion in net new assets (NNA).
Overall, AUM growth was underpinned by healthy NNA inflows in the Greater China market in particular, and was supported by positive market performance. Larger private banks benefited from account consolidation prior to the introduction of the OECD’s Common Reporting Standard in Asia in 2018, although global regulatory tightening, including Indonesia’s tax amnesty which concluded on 31 March 2017, prompted some cross-border outflows. Further, a number of private banks in the region spent the better part of the year exiting or downgrading smaller or dormant accounts.
High net worth wealth creation in APAC, which grew at a CAGR of 9.8% since 2013, continues to be in line with AUM growth, which grew at a CAGR of 9.9% over the same period. This is a fact that not only underlines the region’s promise but also highlights the challenge private banks face to capture wallet share, especially as non-traditional, digital players capable of providing asset allocation solutions at a low cost and Chinese institutions enter the offshore fray.
Meanwhile, domestic Chinese private banks continue to grow at a markedly faster clip than offshore private banking businesses. China’s Top 5 onshore players increased their total AUM at a CAGR of 25.5% (2013-2017) versus Asia’s (ex-China onshore) Top 5 CAGR of 7.4%. Even so, growth rates for the Chinese industry slowed as regulators put a halt to the sale of ‘guaranteed’ wealth management products that have driven AUM growth.
As with previous years, those banks that pursued an inorganic growth strategy increased their AUM at a higher rate on average (+43%) than those that relied on organic growth (+27%) although the former figure is inflated by LGT’s acquisition of ABN AMRO’s private banking business in Asia and the Middle East and does not take into account Indosuez Wealth Management’s acquisition of Crédit Industriel et Commercial’s (CIC) private banking business in Hong Kong and Singapore. The Indosuez-CIC deal boosted the French private bank’s Asia AUM to an estimated US$15 billion at the end of 2017.
LGT added approximately US$20 billion to its book as a direct result of the ABN AMRO transaction, with the pure play rounding out 2017 with US$63 billion in AUM (+116%). Indosuez Wealth Management, which ranks just outside of the Top 20, grew its AUM by 36% in 2017, largely due to its acquisition of CIC’s private banking franchise in Hong Kong and Singapore. DBS’s acquisition of ANZ’s retail and wealth management business across five markets contributed marginally to its Treasures Private Client and Private Bank AUM (US$109 billion), as did Bank of Singapore parent OCBC’s purchase of NAB’s private wealth business in Hong Kong and Singapore (US$99 billion). EFG also completed its acquisition of BSI Hong Kong, having finalised the Singapore portion at the end of 2016.
Of those banks that have pursued an organic growth strategy in Asia for the past five years, Goldman Sachs Private Wealth Management (+17.9%, 5y CAGR), BNP Paribas Wealth Management (+17.7%, 5y CAGR), Morgan Stanley Private Wealth Management (+11.8%, 5y CAGR), UBS Wealth Management (+11.8%, 5y CAGR) and Credit Suisse (+11.4%, 5y CAGR) have registered among the strongest growth rates.
Meanwhile, Julius Baer, whose acquisition of Merrill Lynch’s International Wealth Management business outside the US in 2012 (completed in 2015) catapulted the Swiss bank up the rankings, reaped the benefits of heavy hiring over the past 24 months, with new joiners transferring over 65% of their book on average, helping to bolster the Swiss pure play’s AUM to a total of US$115 billion, or a 5y CAGR of 12.4%. By this measure, Julius Baer is the region’s largest pure wealth manager by some distance.
Elsewhere, Deutsche Bank Wealth Management shrugged off a challenging 2016 during which its regional AUM dropped, to record a YoY increase of 24% to US$59 billion.
While buoyant markets set the scene for strong transactional volumes and revenues in 2017, the vast majority of Asia’s private banks, wary of revenue volatility and regulatory tightening, doubled down on their managed solutions businesses, driving fund and discretionary portfolio management penetration rates in the region higher. A number of players rolled out flat fee advisory offerings — or are the in the process of doing so. Notably, Credit Suisse’s CS Invest solution pulled in more than US$3 billion in AUM less than 10 months after its launch.
Combined, pure play private banks registering in the Top 20 grew their AUM by 36% YoY, outpacing their universal counterparts, whose combined AUM increased by 28% over the same period. The discrepancy was magnified by LGT’s ABN AMRO acquisition. Union Bancaire Privée, whose purchase of Coutts International in 2016 added approximately US$11 billion to its Asia book, ranked outside of the Top 20 for 2017, but nevertheless increased its AUM by 21% YoY to US$14.3 billion.
Join 10,000+ private bankers and wealth managers
Your company may already have a subscription. Add your work email below to check.
Asia (ex-China onshore) Pure Play AUM (US$ billion)
Asia-headquartered private banks, whose combined AUM jumped 40% in 2017, continue to grow at a faster rate than their international players. DBS (incl. Treasures Private Client and Private Bank; +34%), CMB Private Bank (+41%) and UOB Private Bank (+33%) all beat the international average of 27%.
Ones to watch
Deutsche Bank Wealth Management
Union Bancaire Privée
China Minsheng Banking Corporation
Pictet Wealth Management & Lombard Odier
Even so, both banks – Swiss wealth managers in the purest sense – continue to succeed in Asia organically, largely due to their sizeable discretionary portfolio management (DPM) businesses which are a significant source of (stable) revenue, notwithstanding support from their asset management arms.
Although few are calling for a major correction in equity or bond markets, margin calls could come into play for leveraged investments from more aggressive peers in 2018 – if risk management proves insufficient. In addition to pure capital loss, unhappy clients could pull out from banks that have been excessively optimistic, thereby impacting net inflows for the year. By contrast, Pictet and Lombard Odier’s stronger focus on DPM would suggest that both banks are well-positioned to make decisive positive moves within portfolios and cut losses earlier – a luxury that universal banks lack given their low DPM penetration rates and Asian clients’ tendencies to hold through volatile times if not sell low.
The case for an investment strategy making or breaking a bank’s overall performance is especially pronounced at Lombard Odier, where its DPM approach hinges on risk-based investing. Time will tell if central bank tightening will break correlations that have long been known to traditional 60/40 long-only managers, but if this reality materialises, LO could potentially withstand the turbulence from its commitment to focus on investing specifically in various factors that drive prices rather than in asset classes and sectors. Meanwhile, Pictet will soon welcome Boris Collardi into its fold, which could well prove a boon for its Asia business given his ties to the region.
Standard Chartered Private Bank
But there are encouraging signs. The bank made significant inroads in 2017 – notwithstanding its troubled tech revamp – hiring 60 new frontline staff globally, driven primarily by its Greater China and North Asia unit. The private bank reportedly upped its minimum requirements from US$2 million to US$5 million, globally. While this may have contributed to StanChart’s relatively torpid AUM growth, it also signals a future with higher cost efficiencies. Sources indicate that the bank is also ramping up its product platform, at least within funds and discretionary portfolio management (DPM), to bolster its competitiveness. Its US$1 million loss last year was attributed to greater investment, not only in people, but in new systems to enhance its business – again, questions remain around the scope and timeline of its wealth management and private banking tech project. The recently announced exit of its private banking and commercial CEO, Anna Marrs, potentially indicates a fresh start for the business. Bill Winters, group CEO told Asian Private Banker, at a Credit Suisse conference no less, that the brand, while “tarnished” in some markets, remains “aspirational” for Asia’s wealthy. StanChart Private Bank’s next moves will be crucial.
© Copyright Asian Private Banker 2018. All rights reserved. High quality journalism requires investment. Please share this article with others using the link below, do not screenshot or copy the article. See our T&Cs and Disclaimer for more details.