Private banks in Asia are finding it hard to stay in the game as operating costs mount and their client base undergoes changes, which has driven a frenzy of acquisitions in the past few years, say analysts.
Asia-Pacific beat the rest of world in private wealth accumulation last year, with nearly double-digit growth at 9.5 per cent, compared with 5.6 per cent in North America, 3.5 per cent in western Europe and 6 per cent on average globally, according to the latest wealth report by Boston Consulting Group, which has tracked the sector for 17 years.
“The number of sizeable private banks, say, large enough for a newspaper to cover them, will come down,” Prince Max von und zu Liechtenstein, the chief executive of LGT Group, a private banking and asset-management company owned by the House of Liechtenstein, said in an interview with the South China Morning Post.
“In the last couple of years, we have seen a lot of mergers and acquisitions,” Mark Wightman, partner wealth and asset management, at E&Y, said in a telephone interview. “There is good money to be made but it’s a scale game.”
LGT bought Dutch bank ABN Amro’s private banking arm in Asia and the Middle East in December 2016. Singapore lender DBS acquired Australia and New Zealand Banking Group’s wealth business in five Asian markets: Singapore, Hong Kong, China, Taiwan and Indonesia, in October 2016. Geneva-based Union Bancaire Privée took over private bank Coutts International from the Royal Bank of Scotland in March 2015, a deal that boosted the Swiss bank’s assets in Asia from US$1 billion to US$11 billion.
Assets under management at LGT Bank Asia have grown to exceed US$50 billion this year, after the completion of its deal with ABN Amro, which came with US$20 billion in assets, according to the group’s chief executive.
LGT was ranked the 15th largest private bank in Asia by Asia Private Banker, with US$29.1 billion in assets under management in 2016, before the acquisition of ABN Amro and its US$20 billion in assets under management.
LGT started its private banking business in Asia in 1999, and the acquisition in 2009 of Dresdner Bank (Switzerland) was followed by a selective private banking portfolio from HSBC Private Bank Suisse and a majority stake in London-based wealth management company Vestra Wealth. The group signalled its ambitions in China with the ABN Amro deal in late 2016.
The pace of consolidation among private banks and wealth managers in Asia might slow down in the next few years, but the competition for market share will continue as the regulatory environment becomes increasingly complex and clients are still in wealth-accumulation mode, according to Toby Pittaway, partner and head of wealth and asset management practices in Asia at Oliver Wyman.
LGT Group views managing a younger client base and tailoring strategies for different needs as key to gaining market share in Asia.
“The share of young wealthy clients in Asia is higher than in Europe. Some of the big fortunes now are being created by entrepreneurs who are still relatively young,” said Prince Max. “You need to speak their language.”
Cultural elements will also affect private bankers’ performance in Asia, especially in China, said E&Y’s Wightman.
“What’s quite charming in Asia is when I go and visit clients, I typically meet the whole family. Three generations line up, waiting,” the prince said.
The group is trying to tap China’s emerging ranks of millionaires and billionaires, and hopes to stand out thanks to its track record of preserving its own wealth for 30 generations.
Prince Max is the second son of Crown Prince Hans-Adam II, whose family has ruled Liechtenstein, a principality of only 38,000 people, since the establishment of the country in 1749. Liechtenstein is sandwiched between Switzerland and Austria, and uses the Swiss franc as currency.
The family is from Vienna and still enjoys influence in Austria’s capital, where it also owns palaces and a winery. Forbescrowned the family Europe’s richest monarchs in 2011. Swiss magazine Bilanz estimated its net worth at 8.5 billion Swiss francs (US$9.07 billion) in 2016.
The group had 152 billion Swiss francs in assets under management in 2016 and 129 billion Swiss francs in assets under management in 2015. The private group will release its results for 2017 on March 12.
LGT expects to announce about 200 billion Swiss francs in assets under management, including 150 billion Swiss francs from its private banking arm and 50 billion Swiss francs from institutional investors, according to Prince Max.