For­eign firms boost pri­vate bank­ing

China Daily (Canada) - - CHINA - By WEI TIAN and WU YIYAO in Shang­hai Con­tact the writ­ers at weitian@ chi­nadaily.com.cn and wuyiyao@chi­nadaily. com.cn

More for­eign firms are seek­ing to tap into China’s bur­geon­ing pri­vate-bank­ing mar­ket, tak­ing dif­fer­ent ap­proaches for a po­ten­tially huge mar­ket.

LGT Group, a leading Euro­pean pri­vate-bank­ing ser­vice provider, which is also as­set man­ager for Licht­en­stein’s princely fam­ily, ex­plored the po­ten­tial by bring­ing the fam­ily’s art collection to Bei­jing and Shang­hai, two of China’s rich­est cities.

“The art ex­hi­bi­tions con­trib­ute to the cul­tural ex­change be­tween China and Licht­en­stein. It’s even bet­ter if they con­trib­ute to the busi­ness re­la­tion­ship be­tween the two coun­tries,” said Prince Max of Liecht­en­stein, who is also CEO and pres­i­dent of LGT.

“More (Chi­nese wealthy fam­i­lies) are think­ing for the next gen­er­a­tions, and they are seek­ing ad­vice from us about suc­ces­sion plan­ning,” he said dur­ing his visit to Shang­hai. “The en­gage­ment of a wealthy fam­ily be­yond fi­nan­cial ac­tiv­i­ties, such as into phi­lan­thropy and cul­tural ac­tiv­i­ties, is needed to give the fam­ily more iden­tity and mean­ing.”

Al­though over­seas im­mi­gra­tion has be­come a gen­eral trend among China’s wealth­i­est, Prince Max said it is not a good idea to copy what other people are do­ing. “If ev­ery­one else is buy­ing a property in Lon­don, it might be a lit­tle late for you to do so,” he said.

While the first gen­er­a­tion of China’s wealth­i­est sought fast growth, the sec­ond gen­er­a­tion is more con­cerned with preser­va­tion and trans­fer­ring of as­sets from a risk di­ver­si­fi­ca­tion stand­point, said Vin­cent Duhamel, head of Asia for Lom­bard Odier, a Genev­abased pri­vate bank.

Ac­cord­ing to 2013 ver­sion of China’s per­sonal wealth re­port by China Mer­chants Bank and Bain & Co, “main­tain­ing the wealth” has re­placed “cre­at­ing more for­tune” as the top pri­or­ity for pri­vate -bank­ing clients, fol­lowed by “qual­ity life­style” and “chil­dren’s ed­u­ca­tion”.

“De­mands of China’s wealthy people for pri­vate bank­ing are shift­ing from pure prod­ucts to more com­pli­cated and di­ver­si­fied ser­vices,” Duhamel said.

In March, Lom­bard Odier es­tab­lished a strate­gic part­ner­ship for pri­vate bank­ing with Shang­hai-listed In­dus­trial Bank Co, which is ex­pected to help high net-wealth Chi­nese in­vest glob­ally.

Mean­while, DBS Bank Ltd also an­nounced in March that it has agreed to ac­quire the Asian pri­vate-bank­ing busi­ness of So­ci­ete Gen­erale in Sin­ga­pore and Hong Kong, as well as selected parts of its trust busi­ness, for $220 mil­lion.

This rep­re­sents ap­prox­i­mately 1.75 per­cent of as­sets based on So­ci­ete Gen­erale Pri­vate Bank­ing Asia’s $12.6 bil­lion of as­sets un­der man­age­ment as of Dec 31. The trans­ac­tion, which is ex­pected to be com­pleted later this year, will in­crease its high net-worth as­sets un­der man­age­ment by more than 20 per­cent, the Sin­ga­porean lender said.

The grow­ing wealthy and mid­dle-class pop­u­la­tion in Asia are in­creas­ing de­mands for wealth man­age­ment, said Chng Sok Hui, CFO of DBS.

For pri­vate banks, China is a mar­ket with a huge num­ber of po­ten­tial clients. As of 2013, there are more than 1 mil­lion people with in­vestable as­sets of more than 10 mil­lion yuan ($1.6 mil­lion), a sur­vey showed.

How­ever, the pri­vate­bank­ing mar­ket re­mains very much un­ex­plored. Ac­cord­ing to commercial banks’ 2012 an­nual re­ports, Bank of China has the largest num­ber of pri­vate-bank­ing clients, 40,000, and the Agri­cul­tural Bank of China has about 35,000, while Ping An Bank has 6,000.

Cartier Lam, vice pres­i­dent of BEA China, said China’s pri­vate bank­ing mainly serves the new-rich fam­i­lies, for whom it is very hard to iden­tify core needs, and sim­i­lar prod­ucts and ser­vices among banks have re­sulted in ho­mo­ge­neous com­pe­ti­tion.

For for­eign banks, pri­vate bank­ing mostly refers to man­ag­ing per­sonal wealth. But ac­cord­ing to Dai Xiao­hong, man­ag­ing di­rec­tor of Stan­dard Char­tered pri­vate-bank­ing China, nearly 60 per­cent of its clients are en­trepreneurs, most of whom have not sep­a­rated their cor­po­rate busi­ness and per­sonal wealth.

“In China, there is a lot of in­for­ma­tion, but lack of plan­ning. People need not to be afraid of hir­ing ex­perts,” said Prince Max.

PRO­VIDED TO CHINA DAILY

Cit­i­group an­nounced that it has a growth of 30 per­cent net profit in the fist quar­ter. More for­eign firms are seek­ing to tap into China’s bur­geon­ing pri­vate-bank­ing mar­ket, tak­ing dif­fer­ent ap­proaches for a po­ten­tially huge mar­ket.

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