Under the leadership of Eric Morin, Union Bancaire Privée’s North Asia franchise is making deep inroads into the subregion’s coveted UHNW segment. How? Morin, UBP’s head of North Asia and Hong Kong branch chief executive, tells Asian Private Banker it’s all about product diversity, close collaboration with the bank’s asset management arm, and smart hiring — and the progress shows in the numbers.
Eric, a solid start to the year for the private banking industry in terms of transactional business. How have things looked from a UBP North Asia perspective?
I would look back to November and December as extremely strong months. And, as always, there were a few question marks about what the new year would bring. The first quarter is important for setting the tone for the year, but we saw good client traction for our high conviction ideas to the extent that our brokerage hit a record high in January. February, while a short month, was strong as well, so we are over-delivering at this moment, led by our cash equities and derivatives volumes.
On that note, UBP has made significant enhancements to its structured products offering in this region over the past 18 months.
Indeed, we have increased our capabilities in Asia by adding staff and diversifying our offering. For example, we have just started to market to clients target redemption forwards and pivots. And, I would add, we have increased our Hong Kong headcount on the FX side with the intent of expanding our FX products as an asset class. So this all corresponds to the needs of clients from a transactional perspective.
[The brokerage business] is over-delivering at this moment
At the same time, and from what I understand, UBP in Asia is extremely focused on the discretionary piece. How is that coming along?
The bank has really embarked on a DPM development plan, which will be a significant driver of the business in 2021. We have three objectives. The first is to package and showcase to clients our asset management and money management capabilities — essentially the DNA of UBP. The second is to strengthen our recurring revenue base to insulate the business from a drop in brokerage, if the markets are not moving in the right direction. And the third is to protect and increase risk management for clients because we believe a managed solution by UBP is more protective thanks to the strong risk management element in the way we manage portfolios.
You oversee the North Asia business, which has gone from strength to strength in recent years. How significant is your contribution to UBP’s regional franchise today?
Our North Asia business has gained a lot of market share, especially in the past year. Over the last four years, our contribution to UBP WM Asia growth has increased constantly, both in AUM and profitability. It shows that we are competitive in our ideas, time to market, pricing, and solutions.
[Our North Asia growth] shows that we are competitive in our ideas, time to market, pricing, and solutions
UBP is also making strong inroads in Asia’s UHNW segment. From a North Asia perspective, how much traction are you seeing?
Our progress shows in our numbers. We have built — and we continue to build — an UHNW and family office-style franchise. Around 77% of our clients in North Asia are classed as UHNW — essentially clients with more than US$30 million in the bank. They account for almost 80% of our North Asia AUM, 57% of our revenues versus 41% in 2017, and contributed over 90% of total NNA in 2020.
In fact, since December 2017, our UHNW assets in North Asia are up over 300%. That’s real progress. It clearly shows that our strategy to be present and grow in the ultra segment in North Asia is working.
[Since] December 2017, our UHNW assets in North Asia are up over 300%
Why do you think UBP has been so successful at attracting UHNW clientele in Asia?
First, we have hired bankers who fit the strategy and who have been able to bring clients to the bank. Since 2017, the bankers we have brought in have progressively built this franchise. These are all senior bankers and we have a selective hiring process, driven by the quality and quantity of frontline staff.
Second, we have a diverse range of products. UHNW clients require that diversity. We can propose almost anything, from a simple deposit to a sophisticated private market transaction. The spectrum is immense.
Third, we have the UBP version of a one-bank model whereby we deliver an integrated offering with our asset management arm. This allows us to gain substantial traction with clients who need an institutional-style solution — for example, a dedicated fund registered in another jurisdiction with assets hosted by our asset management division. It’s important to point out that while the private banker does the initial marketing, this is a joint approach, which is extremely easy to achieve at UBP because there are no layers or silos. This capacity to propose institutional solutions to our clients is an important component of our success and a key differentiator. If you don’t have that, then you may miss opportunities to serve very sophisticated clients from an investment standpoint.
This capacity to propose institutional solutions to our clients is an important component of our success
You mentioned private markets — clearly a critical area for any business that targets UHNWIs. How are you developing this piece?
We have enlarged our offering to encompass private debt via our acquisition of ACPI in London, and we continue to provide private market solutions through what is now called the Private Market Group [formerly Direct Investments Group]. On the private equity side, we have a deep and constant flow of transactions that are special and innovative. For example, we were able to bring to clients US real estate leased to a government agency yielding close to two digits annually over a seven-to-ten year period. This is the type of opportunity that we source and for which we do the analysis and due diligence. It’s a compelling proposition.
The ultra segment in North Asia is balance sheet intensive. How do you compete on this front?
UBP, as you know, is a highly capitalised bank. We have a competitive lending policy in Asia. What I mean by ‘competitive’ is that we have adapted our policy to the needs of Asian clients. The loan book has been relatively stable in terms of our North Asia results, because our strategy is to not over-leverage clients. We don’t use credit to grow the business. Having said that, we are willing to support our clients on the leverage side, when their portfolios are diversified.
We don’t use credit to grow the business
So looking back to 2020, were you reasonably insulated from interest rate movements and deleveraging?
Yes, on both fronts. First, the sharp drop in net interest income (NII) was more than compensated for by the growth of brokerage in North Asia. Second, we didn’t see massive deleveraging, because we were not excessively leveraged to begin with. We managed our credit situations at the end of March in a smooth manner. So, I would say our relatively prudent approach to lending and our emphasis on diversification proved its worth.
Across the industry, private banks are putting a lot of work into enhancing platforms and business processes, with an emphasis on client experience, capabilities, and efficiency. What is UBP doing?
We’ve done a lot of work on this front. We can now onboard more sophisticated clients with, for example, dematerialised shares or more complex situations in terms of the type of assets they have. So now, we are considered a highly trustworthy custodian for clients. As far as the middle office and compliance are concerned, we have increased resources in line with the increase in business.
We are taking steps to enhance our digital offering as well. We are working on digital tools for clients, but we don’t believe our clients expect mobile trading tools or the like. We want to provide greater access to content, greater information on markets, and, ultimately, some more substance via mobile devices. That must include remote access to the portfolio with the bank.
Last year alone, we recorded more than US$2.2 billion NNA in North Asia
Finally, Hong Kong’s reputation as a leading global financial centre has taken a hit of late, fairly or otherwise. As the leader of the North Asia franchise of a global private bank, how do you feel about Hong Kong’s prospects?
We are very positive. It’s undeniable that Hong Kong continues to attract interest from private equity firms, asset managers, and private clients. And we continue to see massive inflows. Last year alone, we recorded more than US$2.2 billion NNA in North Asia. On a relative basis, that’s significant. We are benefiting from our proximity to mainland China, and we remain positive about Hong Kong’s evolution.