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.
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.
No 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.