Clients choose staying power over reputation in era of private banking
The Asian style of banking relationships based on reputation will not prevail in the new era of private banking, according to a top banker.
Peter Scaturro, chief executive of Citigroup Private Bank, said: 'Private Bank is the centre of the group and we work with some of the wealthiest families in the world. The families now want technology and financial engineering evolutions for multi-generations.'
Mr Scaturro said that following the market volatility of last year, rich families were looking for a private bank with the staying power to deal with the volatility and guarantee that the firm would survive.
Besides, customer relationships in private banking have evolved into partnerships. This is evident in the clients of Citigroup Venture Capitalist.
'We feel strongly that families do not just want a relationship with a banking institution with staying power, but also to be able to go outside and find more opportunities,' Mr Scaturro said.
He said the private bank had become the clients' partner and co-invested alongside Citigroup in such things as cross-sellings.
Mr Scaturro was satisfied with Private Bank's performance last year, with the number of global customers growing 20 to 25 per cent. Its managed assets also increased to as much as US$40 billion to US$50 billion.
Deepak Sharma, head of Asia-Pacific at the private bank, said growth in the region was more than 25 per cent.
Half of the investments were in United States markets and the rest in Japan, Asia, Latin America and Europe, he said.
Mr Sharma said Hong Kong was the largest market in Asia.
Two months ago, the group began researching the mainland market.
Kaven Leung, vice-president and regional head of Greater China, said that China would be one of the most important investment markets in three to five years.
'We are still at the exploration stage. The potential of the China market will depend on its speed of opening up and the regulations,' said Mr Leung.
'China's accession to the World Trade Organisation will open up opportunities in banking as a whole, especially in private banking, just like the energy markets.'
Mr Sharma believed Citigroup would have the first-mover advantage.
'Nobody in China today is looking at private banking and we are the first offshore office to look at that,' he said.
Mr Sharma said that Asian investors' needs were the same as those in the US and Japan.
'Prior to 1997, investors concentrated more on their home country. Since then, there has been a move to global products and diversification within private banking,' he said.
Mr Scaturro said that the slowdown of the US economy would not have an impact on the group. Instead, it would prompt more US investors to look for bigger institutions with staying power to offer them more investment opportunities.
This would be beneficial to the growth of the group's private-banking business, he said.
Traditional equity had become less attractive now, said Mr Scaturro.
'What is attractive now are alternative markets which are not correlated to equity, such as venture-capitalist funds, real-estate and hedge funds which give access to interesting markets and exposures,' he said.
Mr Scaturro also said the group was continuously looking for potential mergers and acquisitions to expand.
Private Bank now has 90 offices in 58 cities with more than 4,000 employees.
The Internet would not replace private bankers, but it would act as a complement to the business, Mr Scaturro said.
'The analytical and relationship vehicle will always be the individual banker,' he said.
'The Internet is something that the client wants to access information. It will only be complementary to the client relationship.'
Mr Sharma stressed that technology, and not the Internet, was going to change the business models and improve the bank's ability to bring in products and services, which was difficult in the past for cost reasons.
