Clients sticking with UBS, Citi

Published March 12, 2008

Clients sticking with UBS, Citi

Revelations of sub-prime exposure create conservative mood as customers take time to re-evaluate their portfolios, reports SIOW LI SEN


IT IS no surprise that UBS and Citi private banks are the top choices for rich Asians. But what may raise some eyebrows is that despite the beating these institutions have taken recently, their customers remain loyal.

It seems that when it comes to a person's private bank, the love affair is enduring - for better or for worse.

According to Roman Scott of Singapore-based investment and advisory firm Calamander Capital, private banking customers hardly move. And rarely do they close an account.

'It does appear that the sterling reputations of both the giants in the business, especially UBS, have been affected by the sub-prime exposure story,' Mr Scott said.

Undoubtedly, this reputational damage could lead to a loss of market share in wealth management, as the apparent advantage of the giants over smaller boutiques is eroded, he said.

'However, such changes take time. In the world of private banking, clients move funds slowly. And rarely - if ever - do they actually close an account once they have it.'

Mr Scott, who is also economic spokesman for the British Chamber of Commerce, said any effect on the giants will been seen over the medium term, as the new money their private banking clients make is placed in new, or different, homes.

Wilfried Kofmehl, chief executive, Singapore and head of South-east Asia for Julius Baer, said: 'Naturally, the market situation raises legitimate questions and higher awareness among our clients. During this phase in particular we are even closer to them, providing them with all the support they need. We are very pleased with money inflows, although it is difficult to say whether this is partly due to clients moving assets from other banks.'

Julius Baer, a pure-play private bank opened its office in Singapore two years ago.

Carlo Grigioni, UBS vice-chairman, global wealth management and business banking, said: 'While I do not wish to understate the effect of UBS's exposure to holdings in US mortgage securities, any client unease has to a large degree been assuaged by the recent endorsement by UBS shareholders of the proposed capital increase.'

UBS, which analysts reckon faces up to US$15 billion of credit-related losses this year, on top of last year's US$18 billion of write-downs, has had its capital repaired by infusions from the Government of Singapore Investment Corporation and a Middle Eastern investor.

'The capital injection will boost our capital adequacy to higher than the current ratios of any of the world's 10 largest banks,' Mr Grigioni pointed out.

Most units across the UBS organisation have continued to perform robustly, so clients have remained relatively sanguine, he said.

What will be challenging for the entire private banking industry is any slowdown in wealth creation in Asia resulting from a recession in the US. Over the past five years, private banks have grown exponentially in Asia and have hired frantically to cope with the pace, pushing costs up.

'Everyone will face lower profits from existing customers and lower growth of new customers,' said Calamander's Mr Scott. 'Those that have spent the most on recent expensive hires will have the biggest challenge.'

The coming year will be challenging for private banks, but there will still be growth, according to Pierre Baer, chief executive, Societe Generale private banking - Singapore & South Asia.

'The private banking market, especially in Asia, is still moving forward at a high pace, with the new creation of wealth and new markets emerging,' he said.

Monica Wong, HSBC private bank Asia chief executive, said: 'The situation has to some extent created a mood of conservatism. Clients are taking the time to re-evaluate their portfolios and rightly so, as they factor in the risks inherent in the markets now which could impact them going forward.'

Tan Su-Shan, Citi private bank managing director and head for Singapore, Malaysia & Brunei, said growth will come from established markets like Hong Kong, Singapore, Taiwan and Indonesia as well as new hot spots like China, India and Korea.

March 12, 2008

UBS is largest private bank in S'pore, HK: Study

DBS is No.6 with 5% of private banking assets in Asia ex-Japan

By Grace Ng, Finance Correspondent


SWISS banking giant UBS has been crowned the biggest private banking player in Singapore and Hong Kong.

It manages one-sixth of the US$600 billion (S$833.7 billion) of private banking assets in Asia, excluding Japan, which are mostly parked in the two Asian wealth management hubs.

The finding comes from the first-ever private banking league table compiled by an independent party - consultancy Calamander Group - in Hong Kong and Singapore.

The rankings confirmed conventional wisdom that the big guns of Citigroup, HSBC, Credit Suisse and Merrill Lynch would be in the top five.

But it may surprise some that home-grown DBS Group Holdings has come in at No.6 with a 5 per cent market share, trumping major global players such as JPMorgan.

Local rivals United Overseas Bank and OCBC Bank trail behind, each managing US$5 billion of assets compared with DBS' US$30 billion. DBS has 'done well', quadrupling its assets under management between 2001 and 2006, said Mr Roman Scott, the managing director of Singapore-based Calamander.

Its growth is driven partly by its high profile in the fast-growing Singapore market, which Mr Scott estimated comprises private banking assets of more than US$250 billion.

The ranking lists ballpark figures about private banking players in Asia, which have tripled the assets they manage from US$200 billion five years ago.

Mr Scott said the table is 'conservative', with an accuracy of plus or minus 10 per cent, and excludes some newer entrants, such as Switzerland-based EFG and Standard Chartered.

Unlike five years ago when the Singapore and Hong Kong markets were so fragmented that the top five players barely held 10 per cent of the pie, five mega banks now dominate 55 per cent.

UBS is still the 'standout team, tripling its size from five years ago', said Mr Scott.

DBS has climbed to the top of the mid-tier group with its strategy to be an Asia-focused private bank and attracting many newly rich Singaporeans, non-resident Indians and Indonesians, he added.

But mid-tier rivals such as Deutsche Bank and Morgan Stanley have been growing at an even faster pace, so DBS may not maintain its lead for long, he said.

While Hong Kong's pool of wealth is larger at about US$350 billion, Singapore has been attracting more new private banking accounts in recent years. The country has about 40 private banks. Their rapid expansion has ignited a battle for talent and caused office rental rates to skyrocket.

Singapore's efforts to transform itself into a wealth management hub for the region by offering lower corporate and personal taxes, and maintaining strict banking secrecy laws, have earned it the title of 'Switzerland of the East'.

But it can now also be called 'Monaco in the tropics', as its high-end residen-

ces, upcoming Formula One race and casinos will offer a lifestyle that suits the mega-rich, said Mr Scott.

Of the US$250 billion booked in Singapore, about 15 per cent is held by local wealthy clients, he added.

The number of millionaires in Singapore shot up by 11,000 people, or 21.2 per cent, last year - the fastest growth rate in the Asia-Pacific and one of the fastest in the world, said a 2007 Merrill Lynch-Capgemini report.

The remaining 85 per cent of private banking assets in Singapore are held by Asians, as well as people of other nationalities, said Mr Scott.

Indonesians hold more than US$105 billion in Singapore. Only about US$17 billion, or 7 per cent of the total pool, is held by Europeans and Russians, Mr Scott added.

A more controversial issue in Singapore's private banking sector is the inflow of European money. Last year, the European Commission put pressure on Singapore to ease its banking secrecy laws.

It also raised concerns that the country has become a shelter for funds exiting the European Union after its member nations slapped a withholding tax on offshore savings of EU citizens.

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MAIN DRIVER

DBS' growth is driven partly by its high profile in the fast-growing Singapore market that comprises private banking assets of more than US$250 billion (S$347 billion), says Mr Scott.