Following the recent acquisition of Finter Bank, Vontobel’s head of private banking, Georg Schubiger, talks to PBI about the bank’s approach of focussing on select markets and being careful about not expanding too broadly. John Schaffer digs deeper into the Swiss lender’s strategy and finds out about upcoming plans
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Vontobel sits firmly in the middle tier of the Swiss private banking market. With assets under management (AuM) of CHF 31.8bn ($31.8bn), the bank is significantly smaller than the behemoths of UBS and Credit Suisse, but is large enough to not be suffering from the scale challenges that smaller Swiss players are facing.
Zurich-headquartered Vontobel also has relatively modest annual growth targets for its private banking division of between 4% and 6. The bank is underpinned by a multi-generational family – a key differentiator according to Georg Schubiger, head of Vontobel’s private banking business.
Going down the M&A path, Vontobel acquired Finter Bank Zurich (Finter) from Italmobiliare in September 2015, in a bid to expand its Italian client base. Finter had AuM totalling CHF 1.6bn. Schubiger tells PBI, that future acquisitions will also have to conform to the bank’s "focussed markets" strategy and Vontobel’s private banking unit is unlikely to venture into any new geographies.
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By GlobalDataJohn Schaffer: There have been a number of M&A deals in the Swiss private banking market. What is Vontobel’s M&A strategy?
Georg Schubiger: Although we have always stressed that we’re looking for acquisitions in private banking or asset management, Vontobel hadn’t completed an acquisition in private banking for a long time until the Finter acquisition.
Firstly, when we look for acquisitions, we screen potential targets carefully. We need to be sure that by acquiring a target, we do not increase the overall risk of our existing portfolio. We have been quite risk averse in the past and that has served us well.
Secondly, the acquisition has to fit into our target market approach. Finter’s markets (Italy and Switzerland) were fitting into our approach, which made it simple to integrate Finter. To integrate a small bank active in 50 countries would simply be too complex, and thus not make sense for us.
Size is also a factor. An acquisition target should not exceed CHF 20-25bn. With regards to price, we want to be happy about the acquisition when we do it but also five years later, when the acquisition is actually giving a return to shareholders.
JS: How easy has it been to integrate Finter into the Vontobel business?
GS: The whole process was conducted within a short timeframe. We started talks in July 2015, closed by August 2015 and merged by end of September 2015. This was important for us because the costs of a long integration process are huge. We wanted to get the whole thing done in six months to be ready to go on with our business as usual.
The customer integration was conducted over the New Year period. By January 3, all customers were transferred onto Vontobel’s system, Finter’s branch in Lugano was re-branded, and Finter’s front office employees were onboarded and trained on Vontobel’s front line tools.
JS: How has Vontobel dealt with the costs of regulation?
GS: We don’t see any substantial increase in costs since we operate in a lean and efficient way. I think one effect of regulation is that you have to focus even more closely on what you’re doing.
We can’t provide a setup for 100 countries, and we don’t want to – in private banking we have our focus markets, which are Switzerland, Germany, Italy, UK, the US and emerging markets. With regards to the bank’s Asia focus, Vontobel Private Banking chose Hong Kong as a home base in Asia due to the ties with mainland China. We also opted for a boutique-model approach – going for a reduced advisory license since Asian clients are booked on Vontobel’s Swiss platform.
The US is actually the second biggest market for the Vontobel group after Switzerland. We have always been adamant about following all the rules, which provided us with a comfortable situation with regards to the US tax issue.
JS: What differentiates Vontobel from the large Swiss private banking players?
GS: For the last 91 years we have had the same majority shareholder, the same brand, and weathered the financial turmoil well.
The Vontobel group has similar efficiency figures to the bigger players, yet they are 30-50 times bigger. Where did the economies of scale go?
One differentiating factor for us is the stability and long term orientation of a family-owned business, which is what our clients are looking for when choosing Vontobel as their wealth and asset manager.
JS: How has the death of Vontobel’s patriarch, Hans Vontobel (on 3 January 2016), affected the ownership structure of the business?
GS: Currently, the owner families have a bit more than a 60% share. Much of it is in a pooling agreement that gets automatically renewed every three years.
The bank has been family owned for four generations and there’s no reason to believe that anything is going to change.
JS: How does the private banking division integrate with other parts of the business such as asset management and investment banking?
GS: We have one CIO and one investment committee comprising members from both private banking and asset management. On the investment side, we have one view, and we use synergies on the client side.
There are some overlaps, especially when we talk about UHNWIs. We don’t have a dedicated UHNW department, but due to our business model and size we are able to put together a team of specialists from various business units across investment banking and asset management.
JS: What measures has Vontobel put in place to attract wealthy millennials?
GS: We’re seen as a wealth management and technology focused company, and that attracts a lot of younger customers.
We offer an absolute digital setup including desktop, tablet and smartphone solutions, providing access to our entire investment universe. We’re one of the main brokers in Switzerland, research wise, and we have a large fund research department. A client can receive brokerage research content, fund content, market analysis – and get all that information free – combined with the usual portfolios and daily information.
Whenever something happens in the market, immediately there’s a flash on our application where Vontobel’s view can be read. Clients can look at their portfolios in real time – go into all the instruments and shares, and it links to our research.
We’re also about to launch a trading function and a portfolio simulation tool for our app.
