Barclays Wealth targets expansion in North Asia
Barclays Wealth, while new to the Hong Kong market, is hoping to double its assets under management in North Asia in the next three years.
The expansion comes at a time when many of the leading private banks are still trying to break-even or are losing money.
It is part of Barclays' larger ambition to build its private banking business. Last year, the bank's board allocated GBP350 million (HK$4.3 billion) to Barclays Wealth chief executive Thomas Kalaris to expand the business.
The bank does not disclose its figures for North Asia - which includes the mainland, Hong Kong and Taiwan - but Pakorn Boonya-Kurkul, Barclays Wealth's head of North Asia, said that based on industry standards, a relationship manager needed to have at least US$200 million in assets under management to make it a profitable business.
According to industry estimates, the bank has about 100 relationship managers in the region, and Asia- Pacific contributes about 10 to 15 per cent (or GBP17 billion to GBP25.5 billion) of global assets of GBP170 billion.
While the high-end market is growing in North Asia, private banks have found the market difficult to penetrate, as costs rise and clients have less appetite for complex products that carry higher margins.
The average cost-to-income ratio for private banking firms in Hong Kong and Singapore stood at 97 per cent last year, 23 percentage points higher than firms in Switzerland, a PricewaterhouseCoopers survey, released in September, shows.
New competitors have also intensified market competition.
Last month, La Roche & Co Banquiers, a 224-year-old Swiss private bank, closed its Hong Kong office, saying 'the anticipated synergies between the bank in Switzerland and the company in Hong Kong' did not materialise.
Barclays' Boonya-Kurkul said the bank's assets under management had shown 'quite a satisfactory growth rate' in the past year, and its strategy was to focus on its ultra-high-net-worth clients, who have US$100 million or more, or have at least US$20 million in investible assets with the bank.
Boonya-Kurkul said the bank was focusing on recruiting senior private bankers. More than 50 per cent of the bank's relationship managers in North Asia have 15 years or more of experience.
But the recruitment strategy can be costly. Kenny Lam, a McKinsey partner who focuses on private bank consulting, said banks was offering 10 to 30 per cent wage premiums to get senior private bankers to move from their previous jobs.
However, Boonya-Kurkul said Barclays was trying to strike a balance between being competitive for new talent and not alienating existing employees. In the past year, client activity at Barclays had increased fourfold - either in terms of assets under management or deals completed, Boonya-Kurkul said.
In the past six months, Barclays had begun offering investment banking services (such as capital-raising and merger and acquisitions) and had seen growing client interest in these areas, he said.
