Expert Insights How to create a clear strategy for long-term success Private banking in Asia today faces a heavy regulatory burden, a high cost base and expectations of more industry consolidation. To be profitable, institutions need to be focused on their strengths, on being efficient and on building and maintaining a solid platform, says DR Henri Leimer, chief executive officer for LGT Private Banking Asia. Making private banking profitable in Asia is far more difficult than many people might think. There are some obvious challenges – and costs – stemming from the broad regulatory and investment environments, and these impact all participants. But it is how an individual institution responds to these, and how it builds and positions its overall offering and platform which will determine its sustainability as a viable business in the region. Yet Asia is not an easy market in which to succeed. “A relatively large number of players have been investing in their Asian business for the last 10 to 15 years to achieve this, and still don’t make a profit,” explains Leimer. Getting the balance right Too often there is a mis-match between an organisation’s assets under “The starting point for any organisation serious about succeeding in this space is having a good asset base and a solid platform. Those components will lead to healthy revenues, and that will guarantee profitability.” According to Dr Henri Leimer, chief executive officer for LGT Private Banking Asia, the starting point for any organisation which is serious about succeeding in this space is having a good asset base and a solid platform. “Those components will lead to healthy revenues, and that will promote profitability,” says Leimer. 1 management (AUM) and the size of its operations. Over-capacity often comes from a lack of systems, processes and an efficient organisational mind-set, making a healthy balance between assets, returns and costs less feasible. In Leimer’s view, banks with US$10 billion in AUM or less are less likely to [email protected] | www.hubbis.com Henri Leimer LGT Private Banking be profitable; those with US$15 billionplus have a better chance, he says. That is assuming they can keep costs of people and processes under control. Further consolidation in Asian wealth management, therefore, seems inevitable, he adds. Back to web version Expert Insights It is certainly a concept that is now increasingly discussed, especially since the announcement of the Societe Generale sale of its Asian private banking assets to DBS Bank. in terms of sophistication, says Leimer. “Private banks need to cater for all private clients – not only for those who want to trade, but also for those focused on asset allocation and discretionary mandates,” he explains Leimer points to that as a wake-up call for other banks. “It only takes one player to be a first-mover, and others will quickly follow.” This relies heavily on the bank’s technology platform, including good trading infrastructure. After all, banks need to make rational decisions. For example, in situations where a private banking business comprises less than 1% contribution to the overall group’s profit, it becomes hard to justify any management attention. “This takes a lot of constant investment in the necessary systems,” says Leimer, adding that it is essential for smaller banks to also be able to provide a similar service as clients get at the largest organisations. Yet there is often a lot of time, energy and resources spent on building a platform and proposition in Asia. “I think a lot of international private banking players will go back to their home markets within a few years’ time,” predicts Leimer. “Then they can be competitive in those areas of their business, in their home markets, where they have a stronger, clearer value proposition.” Creating a path for success Sufficient scale and a solid platform are also required in Asia to ensure the required level of tailoring of the offering to clients’ needs. This is getting more important as the Asian client base continues to increase 2 At LGT, for example, Leimer says it is undertaking what it calls a “Smart Banking” initiative, which will launch in mid-2015. “This will signal a more sophisticated use of tools and technologies to bring the group to the next level,” he adds. Another aspect of creating a sustainable offering is growth that is measured and manageable. This plays perfectly into LGT’s hands. “It is about growing slowly, and with the right people, rather than filling budgets and headcount targets,” explains Leimer. He says that is more challenging for private banks which are part of a large listed company, where the strategic direction is impacted by senior man- [email protected] | www.hubbis.com Building a successful proposition Henri Leimer suggested some key components of building a profitable private banking business: Grow with the right people Hire slowly after doing thorough due diligence Invest in the technology platform and dealing systems to guarantee you can deliver Challenge yourself to improve React to competition agement making decisions with share prices and options in mind. “As we are privately owned, it allows us to really think in terms of a horizon of three to five years, rather than quarterly or even annually,” says Leimer. 10-year vision Thinking further ahead, Leimer says LGT’s focus, as a group, is to position its Asian business as a major growth contributor. “We are well-positioned for this. Already 20% of the overall group’s clients are in Asia and our AUM is US$18 billion.” Back to web version
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