Swiss banks step up bat­tle for Asia's su­per-rich

The Pak Banker - - FRONT PAGE -

Swiss bank UBS's gi­ant ban­ner on Hong Kong's One Pek­ing Road sky­scraper, so big it has drawn com­plaints for keep­ing so­lar pan­els in the shade, is a tes­ta­ment to the re­newed push among Swiss banks to win busi­ness from Asia's bur­geon­ing ranks of mil­lion­aires.

Switzer­land's wealth man­agers have long courted Asia's su­per-rich amid slow­ing growth at home and an in­ter­na­tional crack­down on its bank se­crecy rules that has made the coun­try a less at­trac­tive place to keep cash. But the com­pe­ti­tion has re­cently shifted up a gear, with the new boss of Credit Suisse ( CSGN.VX) sig­nal­ing he wants to em­bark on a sim­i­lar path to cross-town ri­val UBS (UBSG.VX), which in 2011 chose to shrink its in­vest­ment bank and fo­cus on the more sta­ble wealth man­age­ment busi­ness, es­pe­cially in Asia.

"Ev­ery­body wants to be in Asia," said An­dreas Brun, a bank­ing an­a­lyst at Switzer­land's Zuercher Kan­ton­al­bank (ZKB). "It's not a sud­den thing but they sud­denly talk about it as the main strat­egy."

The at­trac­tions are ob­vi­ous, with a re­cent slow­down in growth still leav­ing many Asian economies far out­pac­ing Western coun­ter­parts. Bos­ton Con­sult­ing Group (BCG) fore­casts pri­vate wealth in the Asia Pa­cific, ex­clud­ing Ja­pan, will grow on av­er­age by 9.7 per­cent a year through to 2019, more than dou­ble the rate in Western Europe.

Ac­cord­ing to the latest Asia Pa­cific Wealth Re­port pub­lished in Oc­to­ber by Capgem­ini and RBC Wealth Man­age­ment, the re­gion's pop­u­la­tion of high net worth in­di­vid­u­als -- de­fined as those with in­vestable as­sets of $1 mil­lion or more, ex­clud­ing pri­mary res­i­dence, col­lectibles, con­sum­ables, and con­sumer durables -- grew 17 per­cent to 4.3 mil­lion in 2013, while their wealth grew 18 per­cent to $14.2 tril­lion.

That com­pared with growth rates of 13 per­cent and 12 per­cent re­spec­tively in the rest of the world. But turn­ing Asian riches into prof­itable busi­ness is no easy task for wealth man­agers. Asia's grow­ing ranks of self-made mil­lion­aires and bil­lion­aires are prov­ing more ac­tive in man­ag­ing their wealth than Euro­peans liv­ing off in­her­i­tances, regularly play­ing banks against each other to get the best deal. "It's their own money, not the money of the fa­ther or grand­fa­ther," noted ZKB's Brun.

Asia's su­per-rich also tend to spread their money out over six banks or so. "Asia is a highly banked mar­ket," said Claude Haberer, head of Swiss bank Pictet's wealth man­age­ment busi­ness in Asia. "Asians are will­ing to try out a bank but you have to ex­plain what you bring to the ta­ble." And wealth man­agers are in­creas­ingly hav­ing to of­fer in­flated pay pack­ets to poach bankers in a re­gion where de­mand for tal­ent ex­ceeds sup­ply. "Those who make it in the Asian mar­ket are those who are will­ing to in­vest sig­nif­i­cantly," Haberer said. "There is def­i­nitely an is­sue of min­i­mum size, be­low which you just can­not pay the en­try ticket."

Pri­vate banks in the Asia Pa­cific typ­i­cally need as­sets un­der man­age­ment of more than $20 bil­lion to be prof­itable, ac­cord­ing to con­sul­tancy EY. To bulk up quickly, banks could look to ac­qui­si­tions. In re­cent years, Julius Baer has bought Mer­rill Lynch's wealth man­age­ment busi­ness out­side of the United States, while Union Ban­caire Privee has snapped up Coutts In­ter­na­tional. Both pur­chases helped the banks beef up their pres­ence in Asia.

Lead­ing the pack in size at the mo­ment is UBS, the big­gest wealth man­ager by as­sets glob­ally and in the Asia Pa­cific, which BCG es­ti­mates will over­take North Amer­ica in 2016 as the world's wealth­i­est re­gion. In 2014, UBS man­aged $272 bil­lion in the Asia Pa­cific re­gion, ac­cord­ing to a study from mag­a­zine Asian Pri­vate Banker. Citi's (C.N) pri­vate bank and Credit Suisse rounded out the top three with as­sets of $255 bil­lion and $154 bil­lion re­spec­tively.

But com­pe­ti­tion is heat­ing up, with Credit Suisse's Asia Pa­cific CEO Hel­man Si­to­hang say­ing the bank was tar­get­ing the re­gion's grow­ing pop­u­la­tion of en­trepreneurs. Judg­ing by its gi­ant Hong Kong ban­ner, un­veiled ear­lier this year as part of the bank's largest out­door ad­ver­tise­ment in the world, UBS is de­ter­mined to de­fend its lead.

Ed­mund Koh, the head of UBS's wealth man­age­ment busi­ness in south­east Asia and Asia Pa­cific hub, said Credit Suisse faced a chal­lenge to catch up. "They say Asia is an im­por­tant mar­ket go­ing for­ward," he said. "For us, it has and will al­ways be an im­por­tant mar­ket." Koh hopes the Asia Pa­cific will con­trib­ute at least one third of UBS's pri­vate bank prof­its by 2017, com­pared with just un­der 30 per­cent now.

With al­most 1,200 re­la­tion­ship man­agers, ac­cord­ing to Asian Pri­vate Banker, UBS has more than twice as many bankers in Asia than any other wealth manger. Credit Suisse's Si­to­hang told Reuters the bank would con­sider rais­ing head­count in the re­gion, though re­tain­ing bankers can be just as im­por­tant as hir­ing new ones.

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