Asia wealth managers grow as crisis crimps rivals in business

Asia wealth managers grow as crisis crimps rivals in business

Singapore: Asia-Pacific banks are stepping up hiring private bankers and seeking acquisitions to grab market share in an industry so far dominated by foreign players such as UBS and Citigroup Inc.

The bold moves signal a shift in the balance of power away from Western banks, suffering from massive credit losses and accusations that they sold toxic investments to rich clients. Banks in Singapore, Australia, China and Japan are also boosting wealth offerings to benefit from an increasing trend among the rich to invest in their home markets and in simpler financial products.

The domestic banks are initially focusing on “high networth" individuals with $1-10 million (Rs4.8-48.4 crore) in assets, with an eye on the super rich as they expand in the fast growing markets of China, India and Indonesia.

“There is a good window of opportunity for these guys to take market share," said Bhalaji Raghavan, a senior adviser on banking in Asia at consultancy Capgemini. “If they continue to do well and execute well, I am sure they will gain momentum and become reasonably good banks."

The industry shake-up comes at a time when the rich, burned by bad investments, want better advice, transparency on what they are investing in and real-time data on their trading positions.

A PricewaterhouseCoopers survey showed that for 53% of the rich their primary source of financial advice was their own research and knowledge, reflecting a “significant" lack of trust in private bankers.

Assets of “high networth individuals" in Asia dropped 22% to $7.4 trillion in 2008, according to Merrill Lynch/Capgemini’s World Wealth Report 2009.

Foreign banks, which have traditionally relied on offshore centres Singapore and Hong Kong to tap rich clients, are also under pressure to move their businesses onshore as a global fight against tax cheats forces countries around the world to ease strict banking secrecy laws.

The weakness in the offshore model was thrust into the limelight after Switzerland agreed to reveal names of 4,450 wealthy American clients of UBS in a tax dispute settlement that pierces traditional Swiss banking secrecy.

Asian banks are also looking at acquisition opportunities for growth as foreign private banks such as ING, hit by credit woes and a lack of scale, exit the region.

ING, which did not even rank among the top 10 players in Asia’s private banking league table last year, is selling its Asian and Swiss units. Singapore’s DBS Group is one of the bidders, sources said.

Even in larger economies like India, competition is heating up between foreign banks like Morgan Stanley and Deutsche Bank and home-grown wealth managers.

“As the pie grows, Indian players will gain greater market share because this is a business where clients have to feel comfortable about a brand and knowing that the brand will exist in India for a further period of time," said C. Jayaram, head of the wealth management arm of Kotak Mahindra Bank.

Asian banks are trying to gain ground at a time when the rich may be looking to put more money into Asia.

Foreign banks like UBS and Citigroup, meanwhile, are also not backing away from Asia, where they led the private banking league table last year.

“The scale and depth of our business will enable us, simultaneously, to satisfy the demands of an increasingly stringent regulatory environment and the ever-changing needs of our clients as the region returns to growth," said Christine Ong, head of UBS Wealth Management in Singapore.