Complete Property Market Updates of Singapore

April 27, 2008

Tapping the Asian market

Filed under: General — Propertymarketupdates @ 12:32 am

Private banks are realising there is huge potential for growth in Asia and are confident of a strong year ahead, writes GENEVIEVE CUA

MARKETS are down, writedowns from sub-prime losses aren’t over, and the US is grappling with what some pundits believe may be the worst economic downturn since the Great Depression. Still, private banks that look after the portfolios of Asia’s well-heeled are confident of a strong year ahead.

Merrill Lynch’s head of global wealth management (Asia-Pacific), Rahul Malhotra, expects a 30 to 40 per cent growth in assets this year, for example. That’s just about the pace of last year’s growth.

‘There is growth overall in the Asian economies even with what is happening in the US. Inherently we will see growth come through. People are still making and saving more money.

‘The types of investments clients may make could vary with the climate. In the past perhaps they invested directly in equities. Today there is more focus on fixed income.’

Tjun Tang, Boston Consulting Group vice-president and director, says the outlook remains bright, even if poor market performance may be a dampener. Wealth, he adds, is typically driven by three factors – economic growth, savings rates and a strong investment market.

‘What is interesting in Asia is that we still have strong growth fundamentally in the economies. So, entrepreneurs are still benefiting.’ Most Asians are also shielded from market losses, as they have a greater proportion of wealth in cash, relative to the wealthy in the US or in Europe.

Private bank penetration is also ‘quite low’. ‘In Asia ex-Japan, we’re seeing assets sitting in private banks of less than US$1 trillion. But household wealth across Asia comes to US$16 trillion. A lot of that may not make it to private banks, but many banks are growing by 20 to 30 per cent a year.’

Managing director of Calamander Capital Roman Scott, who used to head Boston Consulting’s wealth management practice, believes the wealth of non-Japan Asia will soon overtake that of Japan. Ten years ago, Japan dwarfed non-Japan Asia’s wealth. By his reckoning, major private banks in Asia have tripled assets under management over five years from US$200 billion to US$600 billion. That may well be underestimated as some banks are reluctant to furnish assets data.

How is a bank to get a larger share of clients’ wallets? Investment banking and corporate finance are one avenue, particularly in the context of Asian clients’ entrepreneurial profile. Credit Suisse managing director Marcel Kreis calls this segment of expertise ‘private investment banking’.

In Asia, entrepreneurs are highly represented among the wealthy, compared to other parts of the world, he says. ‘Almost every client is an entrepreneur, mostly first or second generation owners of businesses with their wealth tied to their business and to real estate.’

‘There are a number of banks that in theory can deliver the integrated bank to clients. In my mind, there are really only very few that can actually do this.’ He expects Credit Suisse’s Asian assets to expand by 20 to 30 per cent annually.

A second strategy is to simply be where the money is. This means setting up onshore centres in the most promising markets. UBS Wealth Management managing director Yeong Phick Fui says the management of domestic wealth is largely untapped. The latter comprises 90 per cent of the total wealth pool. UBS has earmarked a number of markets for domestic expansion, including Japan, Australia, Taiwan and China.

Citi Private Bank managing director and region head (Singapore, Malaysia and Brunei) Tan Su Shan says onshore commitment is a must especially in India and China. ‘(We are) committed to an ambitious onshore build-out in these two economic giants to capture market share.’

Yet another opportunity is to explore issues around inter-generational wealth transfer. Bank Julius Baer chief executive Wilfried Kofmehl says a study by PricewaterhouseCoopers has found that 80 per cent of Asian wealth will be transferred to the next generation in the coming years. ‘The transfer of wealth will have the most crucial impact on how we conduct our business here,’ he says.

That is why banks jostle for a share of mind among the wealthy’s children as well. Most banks now run ‘next generation’ programmes attended by clients’ children to discuss various issues including investments and business succession. Even relative newcomers to the Asian wealth scene are unfazed by the competition.

Lombard Odier Darier Hentsch (LODH), which boasts a two-century pedigree, set up an office here just this year. LODH deputy chief executive Richard Wee expects the bank’s Asian assets to reach US$2 billion within two years. He says the bank’s niche offering and a reputation so far untarnished by sub-prime exposure will offer an edge.

‘(Clients’) biggest concern is the retrenchment exercises of banks who are most affected by sub-prime losses, in particular the banks which emphasised market share rather than profitability as a growth objective. Turnover causes distress to our private clients.’

Meanwhile, finding good bankers surely remains one of the biggest and most stubborn challenges that banks face. Over the last couple of years, the frenetic drive for bankers saw compensation levels skyrocket.

Nick Hughes of Fox Partnership, which specialises in top level hires in wealth management, says: ‘Last year banks were quite reactive. It was a case of winning market share and paying to get bankers in with established books of assets under management.

‘Now people are showing more caution. Instead of bringing in five bankers, they may say – we’ll take two very good bankers who we know can produce results. Bankers are having to be very accountable this year. I don’t think it’s all doom and gloom. Some of the packages are still unbelievable. But they have to be very accountable.’

ABN Amro Private Banking Asia head Barend Janssens says: ‘(Banks) are looking for private bankers to generate at least US$5 million in revenue. Strong product knowledge and being able to generate revenue (but not to the point of product pushing) are skills in demand now. Clients are also more savvy.

‘Private bankers who listen to what their clients want, have their trust and exercise integrity will leap ahead as they are not product pushers but concentrate on creating value for the client.’

Source : Business Times – 9 Apr 2008


Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Blog at

%d bloggers like this: