Citi is closing out its consumer banking operations in 13 markets, but has declared that it plans to “double down” on wealth management in Asia Pacific. Given the lender’s highly reduced footprint this is likely to prove challenging.
The bank will continue to service larger and institutional clients, but will discontinue its consumer banking business in 13 markets – 10 of which are in Asia. It will continue to operate “wealth centres” in Singapore and Hong Kong.
Both markets are critical wealth hubs in the region, with Singapore serving as a gateway to Southeast Asia and Hong Kong to Greater China, and as such seem a natural choice. And Citi does seem committed to these hubs. At the end of 2020 it opened its largest wealth advisory business in Singapore, and announced that it will hire up to 500 people in Hong Kong to expand its wealth operations.
However, this comes at a time when other players are investing in an onshore presence in the wider region. For example, Goldman Sachs is aggressively growing its asset and wealth business in China. It aims to hire 70 staff in 2021, with plans to double its headcount to 600 by 2024.
HSBC is also busy growing its Asia onshore presence. The bank launched a new private banking business in Thailand in February, and announced it will employ 3,000 bankers in China to target wealthy investors over the next five years.
Between December 2020 and 2025, the number of HNW investors in Asia Pacific is forecast to increase by 48.1%, according to GlobalData. This compares to 40.6% globally, excluding Asia Pacific. Yet competition is becoming increasingly fierce as more providers are eyeing a slice of the pie. Our surveying of the Asian market shows that 64% of industry participants feel that competition from other wealth managers for HNW clients has increased over the past year.
As this is the case, wealth managers will have to up their game to secure share of wallet. Home to highly skilled workforces, competitive tax regimes, and sophisticated financial markets, Singapore and Hong Kong have strong appeal and attract a good chunk of the wider region’s HNW wealth.
But private banking is about personal relationships. Uptake and usage of digital channels is on the rise, but face-to face contact remains critical – especially at the onset of any relationship. Trust has to be built for HNW investors to hand over their fortunes. This gives providers with an onshore presence a clear advantage.
GlobalData research shows that 13% of HNW client acquisitions stem from internal referrals from the retail banking division, and another 11.9% from a relationship manager’s own contacts in Asia Pacific. A local adviser base, something Citi will lack, will prove to be a strong asset in capturing the wealth and the additional 2.1 million Asian individuals that are forecast to qualify as HNW by 2025.