Arbuthnot Latham, the UK boutique private bank, is attracting clients from the top-tier banks by offering a more personalised service, while also providing commercial banking services that are being used by its entrepreneurial clients. John Schaffer speaks with its new CEO, Ian Henderson
Go deeper with GlobalData
Arbuthnot Latham does not claim to compete in scale with the top tier private banking players. However, the new CEO of the Arbuthnot Latham group, Ian Henderson, suggests that the bank can gain business that the larger players will “either unknowingly or foolishly lose.”
Henderson concedes that the larger private banks are unlikely to be “quaking in their boots over little players like us.” However, the bank’s close relationships with its clients and ability to make speedy decisions is attractive to those who feel disillusioned by larger banks.
Henderson tells PBI that the majority of the new private banking clients the bank receives each month are coming from other institutions.
“I think bigger banks are in a bit of a muddle. Clients are starting to notice that, and clients who have become used to a proper private banking service over a period of time start to see the differences. Where it becomes decision by committee as opposed to decision by individual, taking longer to get things done, call centres – all of these things start to have an impact.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“We’ve certainly seen an incremental client flow over the last 12 months, and equally we’ve seen an incremental banker flow. We’re not being inundated, but we’re certainly approached regularly by disenfranchised bankers.”
Henderson has had a rather illustrious career in banking that has not been limited to the wealth sector. Aside from holding senior positions at Barclays Wealth and RBS, Henderson has also worked at challenger bank, Shawbrook Bank. Most recently, he held the position of chief executive of personal lending at Secure Trust Bank.
Arbuthnot banking group’s performance has been promising of late – the group reported an underlying pre-tax profit of £2m for the first half of 2016. Much of this can be attributed to the £100m gain made on the sale of its stake in Secure Trust and a £117m gain made on the sale of Everyday Loans to UK-based sub-prime lender Non-Standard Finance.
Henderson adds that one of the differentiating factors for clients on the investment management side is the independence the bank has.
“We can keep ourselves honest in that we do not have any in house products to push. We look to the market and provide advice and support. Our investment performance on the whole has been decent, although we have had some headwinds this year.”
Henderson appears rather open minded about the opportunities and prospects for the private bank. He is also mindful of the bank’s heritage – Arbuthnot Latham has been providing private banking services since 1833.
Henderson suggests that there has yet to be a player to revolutionise the industry. He tells PBI:
“Private banking hasn’t changed much over the last couple of hundred years. No one has revolutionised wealth management and private banking yet. However, I think if we’re going to have another long period of extended lower interest rates, it’s going to bring into sharp focus what clients are getting from their private banks and the return on the investment they are making from a wealth management perspective.
“We will need to make sure we’re well positioned, and we’ll build from our main positions of strength – quick and efficient decision making, short lines of command, being flexible and non-bureaucratic.”
Growth of commercial banking unit
Arbuthnot Banking Group launched its commercial bank proposition in 2015. Henderson says that this area is “gaining real traction as a complementary business line to our long established private banking line.” He adds that Arbuthnot has 100 commercial businesses on board.
Clearly, with the selloff of Secure Trust Bank, Arbuthnot is left with a sizable amount of capital. However, Henderson says that the deployment of capital towards the commercial banking arm will not come at the expense of the private bank.
He adds that commercial banking services are often used by private banking clients: “It’s an incredibly well integrated business. There have been approximately 56 referrals from private into corporate. Private banking clients who own businesses or are on the boards of businesses are saying they love the relationship service they get in a personal capacity, and they feel their business would benefit from that.”
“We’ve got to recognise that we are providing a private banking type service to commercials. If cheap and cheerful is what you want, you can continue to operate through call centres without ever seeing a relationship manager. If you want proper relationship management and are prepared to pay for the added service, then we’re the commercial bank for you.”
Managing costs
Arbuthnot is not excluded from the cost pressures that are being placed on private banks. Henderson tells PBI how the bank is managing its costs:
“The cost-income ratio of this business is in the 80s. We’ll never have a 40% cost-income ratio business like some of the challenger banks, because that would be inconsistent with the proposition that we offer, but we recognise that we can be more efficient.”
Henderson notes that the bank is optimising costs by retiring legacy technology systems and implementing Oracle’s Small Bank platform. Growing the commercial banking proposition will help optimise costs:
“Our commercial banking proposition is simple and based around lending and deposits. It’s a lower cost business than the investment management lead private banking proposition.”
Expanding the bank’s UK regional focus will also be a priority. Henderson says there will be a focus on bolstering the Exeter and Manchester offices, whilst looking for new UK locations to expand into. He suggests that a Birmingham expansion may be on the cards as there has been a marked demand from clients. The bank’s Dubai office, which opened in 2013, is performing well according to Henderson.
“The Dubai business got into profitability quicker than we envisioned. Our cost-income ratio is going to improve as the new business gets out of the hockey stick dip and into the accelerated growth phase. We’re looking to see if there’s more we can do in the Middle East”, he says.
