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.
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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
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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.
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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
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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-
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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.”
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