Move over the doomsday naysayers – private banking in Asia is heading towards boom times, says Asian Private Banker’s publisher, Andrew Shale, in the first of a new series of monthly editorials.
Asian Private Banker’s Asia 2014 AUM league table once again shows year-on-year increases of between 4% and 34% in assets under management (AUM) for all private banks monitored. Furthermore, Asian Private Banker’s relationship manager (RM) headcount league table also records significant growth coupled with increased productivity and efficiency. All in all, 2014 was a good year for most private banks in Asia. Various reports suggest that total AUMs in the region will double to nearly US$3 trillion in the next three years (Asian Private Banker’s total AUMs for the top 20 private banks in Asia currently stands at US$1.55 trillion) and our data collected over the past three years certainly supports such cheery sentiment.
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All data research compiled by Asian Private Banker.
When Asian Private Banker started five years ago, sentiment for the private banking industry was at its nadir. Not a week went by without news of lawsuits for mis-selling, of strangled product distribution, and consequent margins held in a vice-like squeeze.
Asian Private Banker estimates that the average book per RM now stands at US$286 million, an increase of 8% over the past two years
Regulators (rightly) bore the brunt of many a politician’s ire and, in turn, private banks (rightly) felt the heat. The upshot of 23 private bank CEO meetings I’ve had in Hong Kong and Singapore since the start of the year suggests that the resulting regulatory sea changes since 2009 have more than tripled legal and compliance costs at private banks – not a cheery thought. However, our figures show other encouraging numbers, the most outstanding of which is the growth in productivity and efficiency of the industry as a whole. Asian Private Banker estimates that the average book per RM now stands at US$286 million, an increase of 8% over the past two years. While RM headcount expanded over the past 12 months by 7.2% to 5,449, total AUMs grew by 11.1% to US$1.55 trillion.
Most significant growth at both ends of the spectrum – not in the middle
The Swiss heavyweights UBS and Credit Suisse increased AUMs by a whopping US$27 billion (YoY growth of 10%) and US$23 billion (YoY growth of 18%), respectively. At the boutique end of the scale, an impressive showing from LGT saw its AUM grow YoY by 18% to US$22.3billion.
The most significant RM headcount in nominal numbers once again came from UBS, which added what most banks would consider an entire RM staff of 154 (YoY increase of 15%), while Credit Suisse increased its RM headcount by 50 (YoY increase of 11%). DBS Private Bank’s acquisition of SG Private Bank in Asia saw its RM count grow by 24% to 267. The most significant RM expansion, in terms of percentage increase, again came from the boutiques with Pictet increasing its team by 32% to 50, EFG adding a further 20 RMs (YoY increase of 19.5%) while LGT, mirroring its increase in AUMs, added a further 21 bankers, a YoY increase of 36%.
The Swiss heavyweights UBS and Credit Suisse increased AUMs by a whopping US$27 billion (YoY growth of 10%) and US$23 billion (YoY growth of 18%), respectively
The increased staffing at either end of the private bank scale appears to suggest that these institutions are set in terms of business model and are following clearly defined strategies. The industry is entering a crucial stage. Following a complete five-year business plan cycle that has completed since its remodeling in the wake of the financial crisis, many private banks in Asia have found that while AUMs have steadily increased, they have not stayed significantly ahead of costs and therefore cost/income ratios have soared. All the eggs that were placed in the Asian basket five years ago (on the assumption that European and American markets were no-go zones) have not paid expected dividends. Add this to volcanic L&C costs and the ever-present worry of keeping up with technological demands, both in terms of delivery and cost, and it is no wonder the next five-year plans for many CEOs are delayed or, presently, non-existent.
It is important to point out that UBS Wealth Management, Credit Suisse and BNP Wealth Management are the only banks with dedicated infrastructure for training and development in Asia – UBS has Campus and Credit Suisse has its eponymous Wealth Institute in Singapore. Indeed, Credit Suisse’s 9,000-square-foot hub hosted over 3,000 participants – including staff and clients – since it launched in February 2014. The importance of these training institutions to both banks should not be underestimated by their competitors. If private banks are to manage US$3 trillion worth of wealth in three years’ time, then another 6,000 bankers need to be found.
If private banks are to manage US$3 trillion worth of wealth in three years’ time, then another 6,000 bankers similarly need to be found
Those meetings with CEOs emphasised the growing trend among Asian bankers for Asian clients, a far cry from when I started in finance in Asia at the start of the 1990s. One CEO reported a bank-wide local-only hire policy for its RMs, while EAM desks also tell me that 80% of business now comes from local clients, as opposed to foreign clients based in Asia – a reverse from just five years ago. All of the above points to the fact that if the industry is to find a further 6,000 local RMs, they will not come from sister industries such as investment banking, and the upgrade for retail bankers to private bankers is a bridge too far for most. Training has to be the way forward.