Asia's private banks stripped bare
Private banks want you. But do you want them? A definitive guide to what the top firms offer, by Tara Loader Wilkinson
For Asia’s millionaires, picking the right private bank can be daunting. Selection entails sifting through a seemingly confusing array of products on offer, not to mention the growing number of firms vying for business. Rachel Kum (right), a cosmetics entrepreneur living in Singapore described her experience: “Ultimately, it comes down to trust. Are they giving me independent advice or are they incentivised to push one product over another?”
The world’s private banks are converging on Asia, partly because the business outlook in their home market has been bleak. The European debt crisis, the rolling back of Swiss privacy laws, a global crackdown on tax evasion, and even the recent introduction of capital controls in Cyprus are beginning to weigh negatively on wealth managers focused on a Western client base.
Meanwhile, Asia generates the highest number of new US-dollar equivalent millionaires each year, according to a 2012 report by Capgemini and RBC Wealth Management. About 3.4 million individuals in Asia were deemed to have ascended into the millionaire’s league table in terms of net wealth in 2011, surpassing North America in social mobility for the first time.
“As Asia is a market region of hope for wealth management, all operators are looking at ways to win market share here,” says Sebastian Dovey, managing partner of wealth management consultant, Scorpio Partnership.
Money Magazine examines Asia’s top 10 private banks as ranked by their assets under management (AuM) in Asia excluding Japan.
AuM is the most direct measure of each bank’s size in Asia. The banks supplied the data directly. In instances where they declined to give a figure, we sourced the data from Private Banker International, a trade publication.
1. Citi Private Bank
Asia AuM: Around US$210 billion Strengths: This Wall Street giant benefits from referrals through its retail arm, Citibank, and its premium division, Citigold. Citi spearheaded global banking in China, last year becoming the first foreign lender to launch a credit card in the mainland. Its private bank focuses on ultra-high-net-worth individuals (clients with a minimum of US$30 million). The bank is a global goliath that offers substantial resources that can be valuable in terms of research and the ability to access exotic markets.
Weaknesses: The global financial crisis wreaked havoc on the bank and its brand – just ask Hong Kong’s mini-bond investors who spent 2009-10 camped out in front of the bank’s Des Voeux Road branch. Moreover, critics say the private bank could be viewed as a brokerage wing of its investment bank, which dominates the group.
In their own words: “For those clients who require customised discretionary offerings, we provide a full global and Asia-centric capability in this area. Our lending business is best of breed, and many of our clients cross-fertilise their private investment activities with that of their businesses, with other parts of Citi’s institutional clients group, of which the private bank is a part,” says Roger Bacon, Asia Pacific head of managed investments for Citi Private Bank.
2. UBS Wealth Management
Asia AuM: US$207 billion Strengths: An industry leader in size and scale, Switzerland’s largest bank has been growing its substantial Asian footprint in the wake of stricter regulations in its home market. It is the industry benchmark in wealth management. It also has top-class technology and a strong regional focus, which means it can offer private banking clients a wide selection of Asian research. And it sponsors Formula One racing.
Weaknesses: As a giant universal bank, UBS is guilty of all the usual big-bank misdemeanours: In 2009, UBS paid a US$780 million fine to the US government for aiding tax evasion. In 2011, the bank revealed a US$2.3 billion trading loss attributed to a rogue trader. In 2012, the bank was fined US$1.5 billion for rigging Libor rates. Analysts say operationally it can be “a bit mechanical”.
In their own words: “Our scale and commitment gives us the capabilities to invest in a chief investment officer organisation, a robust investment process, a good product platform, and a large investment management team which scans the best-in-class inhouse and third-party products, enabling our clients to respond to changing markets in real time,” says Kathryn Shih, CEO of UBS Wealth Management, Asia Pacific.
3. HSBC Private Bank
Asia AuM: Around US$130 billion Strengths: Founded in Hong Kong in 1865, HSBC is one of the oldest banking groups in the world and one of the most recognisable. It built its private bank through its vast retail network. Its other strengths lie in custody, lending and foreign exchange. It is also a big sports sponsor, backing Hong Kong’s Rugby Sevens and various Asian golf tournaments.
Weaknesses: HSBC has been scaling back its non-core private banking and retail operations, which it hopes will eventually make it more efficient. However, near term the cuts may damage client services.
In their own words: HSBC declined to comment.
4. Credit Suisse
Asia AuM: US$113 billion Strengths: The Zurich-headquartered giant ranks as the number two Swiss lender behind UBS. In spite of its more compact size, however, the bank is still regarded as a big global bank with major resources. In 2011, for the third straight year, Credit Suisse won the Euromoney Global Private Bank Award. It scored highly on relationship management, privacy and security.
Weaknesses: Credit Suisse’s wealth management business is smaller and less profitable than UBS’. The bank has also undergone a painful internal restructuring process during the last two years involving layoffs. It is still slashing costs and headcount that could help to contain costs in the long run but may strain client relationships in the meantime.
In their own words: “Private Banking is a marathon and not a sprint. In Asia, we all look at asset volumes, net new assets and the ability to grow the business. However, our challenge as an industry is to translate the growth story into bottom line performance, and to ensure our business is profitable and sustainable in the long term,” says Anna Wong, managing director and market area head, greater China, private banking Asia Pacific, Credit Suisse.
5. J.P. Morgan Private Bank
Asia AuM: Around US$105 billion Strengths: Known as “the billionaire’s bank”, J.P. Morgan is dominant among ultra-high-networth clientele. The bank came through the global financial crisis in better shape than its Wall Street peers. It also has one of the world’s largest and oldest corporate art collections, focusing on modern and contemporary painting.
Weaknesses: Critics say it is selective and can be expensive. The bank’s reputation for prudent banking suffered after last year’s revelation of a US$6.2 billion trading loss in its London office, still under investigation by regulators.
In their own words: “We believe that it takes an entire team, and not just a single banker, to properly serve an ultra-high-net-worth client. That is why we offer clients direct access to a dedicated team of multidisciplinary specialists – bankers, investors, credit advisers and wealth advisers,” says Kwang Kam-shing, market manager for Hong Kong at J.P. Morgan Private Bank.
6. Julius Baer (Merrill Lynch)
Asia AuM: Around US$88 billion Strengths: Bank of America last year offloaded the non-US private banking assets of Merrill Lynch to Swiss independent financial group Julius Baer. Analysts praised the move, saying Merrill’s strong presence in emerging markets would complement Julius Baer’s private banking brand.
Weaknesses: The integration between the two banks will be ongoing over the next two years and will likely result in upheaval for private clients. Merrill’s wealth management arm was considered by some as a glorified brokerage, and Julius Baer needs to merge these resources into a single wealth management entity.
In their own words: “The compatibility of the two business models, once integrated, will create a new reference in private banking and a powerful offering for all clients of the combined businesses,” says Boris Collardi, Julius Baer chief executive.
7. Deutsche Bank Private Wealth Management
Asia AuM: Around US$70 billion Strengths: Germany’s biggest bank recently combined its asset and wealth management divisions to facilitate a “one bank strategy”. The unified approach will leverage Deutsche Bank’s strengths in investment banking and asset management to the benefit of private banking clients. The group is regarded as a good partner for clients who like to trade actively.
Weaknesses: For Asian clients seeking a European bank, Deutsche Bank has always been in the shadow of UBS and Credit Suisse. Deutsche Bank is often indentified as an investment bank first – it is less known for wealth management.
In their own words: “Deutsche Bank offers traditional and alternative investments across all major asset classes to help our clients protect and grow their wealth. Our entrepreneurial, global culture resonates with clients worldwide and has propelled our growth,” says Ravi Raju, head of asset and wealth management, Asia Pacific.
8. DBS Private Bank
Asia AuM: Around US$47 billion Strengths: As a Singaporean lender operating in its home market, DBS has a natural advantage over its rivals. Underwritten by the Singaporean government, it’s highly stable and one of the few AA-rated banks in the region. DBS has strong retail presence and known for offering generous perks to clients.
Weaknesses: DBS is pretty riskaverse so don’t expect groundbreaking products. Critics call it “a high-end deposit bank”. In comparison, US banks are known for more innovative product ranges, while European institutions are highly regarded for their personalised service.
In their own words: “As a bank born and bred in Asia, DBS Private Bank is able to tailor Asia-centric investment solutions to grow and protect our clients’ wealth for future generations. We achieve this by bringing the whole bank to bear for our clients, providing them with privileged access to consumer, corporate and investment banking services,” says Tan Su Shan, DBS’ head of wealth management.
9. BNP Paribas Wealth Management
Asia AuM: Around US$40 billion Strengths: A niche player offering specialist private jet, super-yacht and even vineyard financing. BNP has one of the broadest product ranges in the market, particularly in the alternative investment space.
Weaknesses: Critics say it lacks a strong brand and scale in Asia.
In their own words: “At BNP Paribas Wealth Management, we are committed to providing a holistic service to our clients. With BNP Paribas Group’s solidity and long history in Asia, as well as our experienced private bankers and strong products and services, we are able to effectively address clients’ specific needs, even under volatile market conditions,” says Mignonne Cheng, Asia Pacific chairwoman and chief executive of BNP Paribas Wealth Management.
10. Standard Chartered Private Bank
Asia AuM: Around US$35 billion Strengths: The bank takes a specialist pan-emerging markets focus in Asia, Africa and the Middle East. It is it a strong corporate bank and a growing investment bank.
Weaknesses: The bank has been successful in attracting affluent clients but has struggled to appeal to the ultra-rich.
In their own words: “We have a clear focus on collaboration and leveraging the strengths of the whole bank, and will continue to deliver the best available knowledge and resource to help our clients grow and preserve their wealth,” says Shayne Nelson, CEO of Standard Chartered Private Bank.