Coutts millionaires make Asia private bank profitable

Union Bancaire Privee, the Swiss private bank and asset manager, will lean on its acquisition of Coutts International to spur growth in Asia, where it's making a loss from serving millionaire clients.

After building a profitable business with institutional clients on the continent, the Geneva-based firm expects the arrival of Coutts clients to reverse the fortunes of its Singaporebased unit serving Asia's most-affluent, according to Nicolas Faller, co-chief executive officer for asset management.

"The acquisition of Coutts will help us reach a critical mass in Asia," Faller, 46, said in an interview this week. "If you want to be successful you need to invest a lot of money. My gut feeling is that there aren't many people making money in Asia."

UBP, founded in 1969 by Edgar de Picciotto, is among a dozen Swiss banks vying with U.S. and European wealth managers for riches in Asia, where private wealth outside of Japan will surge to $75.1 trillion by 2019 from $47.3 trillion at the end of 2014, according to Boston Consulting Group. Firms in Switzerland are also looking east as they face tighter regulation and probes into their role in tax evasion in the U.S. and Europe.

The Swiss have shown more "staying power" in Asia than competitors such as Bank of America Corp. or France's Societe Generale SA, who've sold businesses, said James Anderson, founder of PAM Insight, a research firm based in London and Geneva.

"It's an important step for UBP," Anderson said. "Unlike some of the other Swiss banks in Asia, UBP has the capital available to make deals and as a closely held family business it's able to take decisions and act quickly."

UBP oversaw 7 billion Swiss francs ($7.1 billion) of assets in Asia, mainly for institutional clients, prior to its acquisition of Coutts. It's expecting to absorb 60 percent to 70 percent of the 11 billion francs of Coutts' client assets in Asia under the deal struck with former owner Royal Bank of Scotland Group Plc in March.

Switzerland's largest banks UBS Group AG and Credit Suisse Group AG rank first and third among wealth managers in Asia, according to Asian Private Banker. UBS oversaw $272 billion at the end of 2014, while Credit Suisse had $154 billion. Other Swiss banks have used a mixture of deal-focused and internal growth strategies to chase the top firms in the region.

The integration of Coutts' Asian assets may take at least a year, during which bankers from other firms will attempt to lure clients away, UBP has said. In Hong Kong, the company plans a second booking center to attract affluent families, provided the local regulator grants approval.

Foreign firms in Asia with less than 5 billion francs under management are unlikely to be profitable, according to Faller. "The cost of entering Asia is huge," he said. "The question facing some companies is: how long can they stay and burn cash?"