HSBC
Private Bank has broken into the top five of Private Banker
International’s global index, underlining its position as a major
challenger to the established hierarchy.
The private
bank, headed by CEO Chris Meares, moved from sixth to fifth place
in the half-yearly rankings – ahead of Citi, which recently sold
its Smith Barney business to Morgan Stanley.
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The brand
strength of its parent has allowed HSBC Private Bank to hold firm
during the financial crisis at a time when many wealth managers
have been damaged by scandal and hurt by declining client
confidence. In 2008, when many shed client assets, HSBC had a net
inflow of $24 billion, equivalent to 5.7 percent of its end-2007
assets under management.
The opening six
months of 2009 proved 
more difficult for HSBC, with
a net outflow of $7 billion. Profit fell from $822 million to $632
million, a decline of 23 percent, with underlying profit down 18
percent.
Bank of
America, which took over the mantle of being the world’s largest
wealth manager earlier this year after absorbing Merrill Lynch, has
picked up where UBS, the previous number one, left off – shedding
client assets at an alarming rate.
In its
newly-formed Global Wealth and Investment Management division,
which includes the former Merrill GWM unit, US Trust and Columbia
Asset Management, there was a client outflow of $70 billion, around
13 percent of client assets in just six months.
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By GlobalDataNo information
was provided on inflows or outflows at the brokerage part of the
business, although overall assets under management at Bank of
America (BofA) increased by $53 billion to $1.824
trillion.
Sallie
Krawcheck, the former Citi head of private banking, was recently
appointed head of the business and will have a difficult job to
steady the ship. The sheer scale of the Bank of America/Merrill
franchise means there are huge cost savings to be made. But it
remains to be seen how quickly these efficiencies can be achieved
and it is unlikely the full power of the business will be able to
be harnessed for at least a year or two.
The
newly-formed Morgan Stanley-Smith Barney business has become the
industry’s third-largest wealth manager by assets under management
with $1.42 billion, behind UBS in second. It also has potential to
benefit from cost savings and create a more profitable business
than either Citi’s Smith Barney or Morgan Stanley’s Global Wealth
Management unit were previously.
Interestingly,
although the majority of the clients it picked up were in Smith
Barney’s brokerage business – typically pitched at clients with
$500,000-plus – Morgan Stanley’s percentage of clients with more
than $1 million invested with them increased to 67 percent from 64
percent. It also picked up $243 billion from clients with $10
million or more invested with the bank.
Following the
sale, Citi Private Bank is now estimated to be the sixth-largest
wealth manager. It now has a much more focused business model at
the high and ultra high net worth end of the spectrum, but has
stopped providing as much detail on its wealth operations. PBI
estimates the Citi Private Bank business has around $335 billion
under management.
The
best-performing wealth business among the top 10 was again BNP
Paribas, which clocked up client assets at an annualised rate of
7.1 percent in the first half of the year. That compares with 7.8
percent of net new money in 2008, which made it the best-performing
business among the largest wealth managers.
Last year, BNP
Paribas reorganised its private banking business, dividing it into
two sections: Wealth Management Networks and Wealth Management
International. The domestic business was set up to help build on
the bank’s retail banking franchises in France and Italy,
increasing referrals into wealth management. It is headed by
Marie-Claire Capobianco.
The
international business has operations in Switzerland, Monaco,
London, Greater China, South-East Asia and Latin America among
others and is continuing to build its presence. It recently
expanded its mass affluent programme in Singapore, targeting
clients with S$250,000 ($171,000).
The bank also
benefited from its image as one of the world’s most highly rated
banks. It currently has an AA long-term rating from Standard &
Poor’s. Bank Sarasin, owned by Rabobank, the world’s only AAA-rated
bank, has also benefited from an increasing emphasis among
investors on the financial stability of the institutions they
invest with.
