Originally Posted by
mr funny
Published April 9, 2008
Private bankers upbeat despite credit crunch
By GENEVIEVE CUA
(SINGAPORE) The world may be mired in a credit crunch, economic slowdown and rocky stock markets. But bankers catering to the well-heeled in Asia expect growth almost akin to that of last year, as they hunker down to squeeze yet more productivity out of their relationship managers.
Credit Suisse managing director and head of private banking Marcel Kreis, for instance, says revenues and assets under management have been growing by 20-30 per cent annually. 'Our Asia Pacific private banking operations have been enjoying very strong momentum and this is expected to continue in the next two years, with the objective of doubling the Asian business.'
Merrill Lynch head of global wealth management (Asia Pacific) Rahul Malhotra says the bank saw growth of 30-40 per cent in assets last year. 'I would be surprised if we didn't see those numbers this year . . . There is growth overall in Asian economies. Even with what is happening in the US, inherently we will see growth come through.'
Private banks' relatively low penetration of Asian markets presents opportunities, says Tjun Tang, Boston Consulting Group director. BCG is currently compiling data for its annual wealth survey. 'We're seeing assets sitting in private banks of less than US$1 trillion. But household wealth across Asia comes to US$16 trillion . . . Many banks are growing 20-30 per cent a year. If the underlying wealth is growing at an 8 per cent rate, there must be an increasing penetration of services.'
Market volatility, however, could impact banks' revenue streams as a substantial proportion comprises income that is transactional in nature. 'In Asia, a lot of revenues are generated through private banks selling transactional products. Now that there is less of a single directional trend, one risk is that private banking income may decline or be less stable,' says Mr Tang.
Still, he expects margins in Asia to remain healthy. 'We're still fairly bullish on Asia despite compensation levels having gone up a lot. Pre-tax margins are still in good territory.'
On the hiring front, the appetite for junior bankers appears to have abated, but almost all the banks say they are on the lookout for mature bankers with a book of business.
Nick Hughes of Fox Partnership, which specialises in placing top-level hires in wealth management, says: 'A bank may suffer sub-prime woes. But if there is a strong banker talent, he or she is an asset, regardless of the current situation.' Banks, he adds, will demand more accountability.
The firm continues to work on a number of 'interesting' projects, which includes placing Asian bankers in posts in Switzerland, for instance, to serve Asia from Europe, as well as the reverse - the hiring of European bankers for Asia.
On investments, bank strategists continue to see opportunities in emerging markets, particularly the Middle East and Latin America, and selected Asian markets. JP Morgan Private Bank chief investment strategist Ivan Leung believes regional stock markets are 'excellent long- term investments'. He singles out Thailand and Taiwan, which have underperformed Asia ex-Japan for four years, but are at the start of a domestic turnaround. Singapore and Korea are cheap, he adds, 'but will likely require some patience'.
On a 12-month view, Deutsche Bank Private Wealth Management forecasts a return of 10-16 per cent for US equities; 8-13 per cent for Euroland; and a higher 10-17 per cent for Latin America and Asian equities due to higher growth and earnings.
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