Mumbai: ICICI Bank Ltd is set to enter the high-end wealth management business in an effort to tap into the country’s growing affluence and is close to finalizing an agreement with the UK-based Fortis Private Investment Management Ltd for this, according to people familiar with the development at?India’s largest private sector bank.
“Nothing has yet been finalized. The bank is still exploring the nature of the arrangement. It could be a joint venture or even an advisory arrangement under which ICICI Bank will refer its clients to an overseas player,” said a senior executive at ICICI Bank, who did not want to be identified. An email sent to the UK office of Fortis did not elicit any response.
If the bank decides on a joint venture, it could be between ICICI Trusteeship Services Ltd and Fortis. ICICI Trusteeship Services is the trusteeship arm of the bank that acts as a trustee to its asset management company. “If this happens, the bank can even offer trust management services,” another senior executive of the bank said. Trust management services include the transfer of wealth to legal heirs, creation and execution of wills, and succession planning.
ICICI Bank is not new to wealth management. It has been offering such services to individuals and families, and manages portfolios of Rs5 lakh to Rs50 lakh. The new venture, however, will tap the more affluent customers and provide custom-made services to suit their needs. It is expected to focus on clients with a minimum portfolio of $1 million, or close to Rs4 crore, according to the senior executive of the bank quoted in the second instance.
Banking analysts see ICICI Bank’s move as a logical extension of its retail business, which accounts for about 60% of its total business. The bank has a customer base of 25 million and even though growth of retail assets has slowed to around 20% this year, it has been aggressively garnering retail deposits.
“Three years back, there were very few options before the high networth individual (HNI). Now, they can invest in real estate, private equity, and even stocks and mutual funds abroad. Any smart bank that has the infrastructure will tap this segment,” said a banking analyst with a foreign brokerage, who does not wish to be identified.
According to an Asia-Pacific Wealth Report published by Merrill Lynch and Capgemini, there were almost 1.2 million wealthy individuals in India in 2006 with an aggregate net worth of $350 billion. The majority of India’s HNIs are between the ages of 41 years and 55 years, said the report. HNIs are those who have at least $1 million of financial assets. The number of HNIs in India has been growing at around 20%, next to Singapore where the growth is more than 21%.
ICICI Bank’s new wealth management arm will also provide regular services that wealth managers offer clients, including private banking, estate planning, asset management, legal advice, investment management, tax planning and portfolio management.
Large multinational finance companies such as Morgan Stanley, UBS and Credit Suisse First Boston are targeting the Indian wealth management market. Morgan Stanley announced in October that it would target wealthy Indians with $5 million in assets and pitch its services to them.
Citigroup?and?Merrill?Lynch, through their private banking arms, currently offer services to Indian clients with assets of $10 million and more.
In March, Merrill Lynch had announced its plans to cover at least 10 Indian cities in the next three years from five cities now. Citigroup plans to double the number of bankers dealing with wealthy non-resident and resident Indians to around 200 by the end of 2008. Citi’s broking arm, which handles clients with assets of at least $1 million, plans to expand its network from one office now to 12, across several Indian cities.