Asian banks win as rich seek safety
Assets under management at Bank of Singapore will have doubled in three years as the rich change their investment thinking, says chief
When the world's richest people want to manage and grow their wealth, they now consider safety of assets, not investment return, as the top priority, following the 2008 global financial crisis that originated on Wall Street.
Such a significant change of thinking had given Asian banks a rare opportunity to grab market share in the private banking business, which has been dominated by Western players for decades, said Renato de Guzman, the chief executive of Bank of Singapore.
"A lot of the money coming in [to the Bank of Singapore] are from those who are looking for higher safety of their deposits, so they can sleep well at night and they don't need to worry about [their deposits] any more," said de Guzman in an exclusive interview with the South China Morning Post.
Total assets under management of Bank of Singapore, whose parent company is Singapore's Oversea-Chinese Banking Corp, was expected to exceed US$40 billion by the end of next month, said de Guzman.
Next year, the amount might exceed US$46 billion, double that of 2010 when the bank was introduced as an independent brand for private banking, he said.
The bank was launched as a private banking arm after OCBC acquired Netherlands-based ING Group's Asian private banking business in 2010.
De Guzman, the former chief executive of ING Asia Private Bank, said part of the reasons for the rapid increase of assets within just two years were because of the "safe image" of OCBC Bank.
The bank was named "the world's safest bank" in a recent industry survey by Bloomberg Markets, outperforming many Western competitors.
When asked if he was concerned about the increasing competition among private banks to grab relationship managers from each other, de Guzman said the bank did not want to play the hiring game with some of its European and American rivals.
For private banks to stay profitable, each relationship manager often needed to attract and maintain at least US$150 million in assets to manage, said Kenny Lam, a McKinsey partner who specialises in private banking.
Private bankers who fail to bring in enough assets to manage often face the risk of being laid off after regular performance reviews. So far this year, a number of Hong Kong-based underperforming private bankers have been let go at Wall Street banks such as Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley.
To keep assets growing fast, many private banks often grab relationship managers who have good ties with super-rich clients in the hope they can convince their clients to switch their investments, too.
"It is very hard to grow [assets] and in the meantime to maintain your profitability," said de Guzman, who has been in the private banking business for more than 30 years.
That was why "there are some others who can probably grow [assets] in terms of percentage more than us but in fact they are losing money", he said.
"They could buy market share and try to buy talents, relationship managers, from market competitions. This is very common but this is not a good strategy in terms of growing your business in the long run."