The dire economic environment is forcing Italian private banks to provide more transparency and different styles of service to cater to risk-averse clients calling out for simplicity. Chiara Masini speaks to five Italian banks to get an update on how they are adjusting their service models.

Italy is in recession as its GDP shrank again in the fourth quarter of 2012 meaning Europe’s third-biggest economy contracted for a sixth consecutive quarter. The new crisis engulfing Cyprus could have ramifications for other indebted European countries, including Italy. Although it remains to be seen how desperate they may be. Despite these negative indicators, Italy’s private client industry remains steady with its traditional client base strongly weighted to the North. According to 2012 data collected by the trade association AIPB (Associazione Italiana Private Banking/Italian Private Banking Association) around 70% of private assets are located in Lombardy, Veneto, Piemonte, Emilia Romagna and Lazio.

Unsurprisingly the economic recession and the Eurozone crisis have deeply affected client choices, according to the main Italian private banks, Unicredit, UBI Banca, Aletti, Generali and Akros (for Banca Popolare di Milano). Clients are more and more cautious and have decided to shift their goals from the search for extra returns to the protection of capital.

At a European level, Unicredit offers private banking services with a strong local presence in Austria, Germany, Italy and Poland with total assets in excess of €150bn. In Italy alone, 1300 private bankers and investment specialists offer their advisory services to 60,000 clients with assets of about €83bn.

 

Clients focused on capital protection

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By GlobalData

Manuela D’Onofrio, head of global investment strategy at Unicredit Private Banking, says that the 2008 and Eurozone crisis and the consequent dramatic change in the concept of risk-free assets have reinforced clients’ attention on capital protection and demand for investment solutions characterized by constrained volatility. Their main priority, says D’Onofrio, is the protection of their wealth even to the detriment of a return on capital.

"In the recent past, we also experienced more demand of advice on fiscal assistance to plan for inheritance transfer," she notes. Bergamo-headquartered UBI Banca, the third largest capitalized bank by assets according to the Milan stock exchange, has changed its client service model to optimize customer relationships. UBI Banca Group has decided to combine private bankers with corporate bankers, to offer better coordination based on the customer’s needs. The unit, UBI Private & Corporate Unity, wants to give a point of differentiation with its main competitors, UBS and Credit Suisse, and claims to be the first Italian bank to offer this service model. The service is offered in 50 integrated operating sites throughout Italy, with more than 90,000 customers and about €60bn of managed assets.

According to Luca Monti, Head of Private and Corporate Unity at UBI Banca, "Having private bankers accompany client meetings with wealth advisors often led to investment decisions, mainly driven by emotions, being brought back towards financial rationality in order to achieve consistent results."

 

Banca Generali gaining €100m a month

Now that business people and their families are working within international markets, they request advanced private banking services with specialist knowledge and global vision. This has led market players to develop their range and especially their service models.

Banca Aletti, the private and investment banking arm of the Banco Popolare Group, is focused on domestic clients in Northern and Central Italy and manages €25bn.

Their clients’ primary need is to rely on a trusted adviser able to give support in addressing the complex issues and questions affecting family wealth. Banca Aletti private bankers focus on a long term tailor-made and sustainable strategy which pursues their priorities in terms of wealth protection, development and continuity through generations.

Banca Generali recorded inflows of €1.6bn in 2012 and in the first weeks of the new year has continued to report a monthly growth exceeding the target monthly average of €100m. The two networks of financial advisors and private bankers manage over €26bn in assets under management. The private banking division manages about €11bn across its 310 private bankers. Trade banks were highly affected by the credit crisis, which has limited the ability to provide a quality service to asset management clients. For the company this has translated into a great opportunity to gain market shares in the rich Italian savings market says Stefano Grassi, deputy general manager Banca Generali and head of Banca Generali private banking.

"Despite the crisis, this segment is growing thanks to strong competence and we are seeing many opportunities for the future," he adds.

Banca Akros, the private banking unity of Gruppo Banca Popolare di Milano, manages €2.01bn and their managers’ opinion is that there is no new saving capacity. All that can happen is an inflow of money coming from the sale of other asset classes.

A Banca Akros spokesperson says real estate is no longer the preferred asset class, due to the increase in the tax burden. In 2012, the capital gain rate has increased in Italy from 12.50% to 20% and the so-called Tobin tax on financial transactions came into force in Italy on 1 March, increasing wealth taxes on deposits and securities.

"In this context people in Italy go for very simple and transparent investments," the spokesman added.

The message is clear: give clients increasingly clear levels of advice and transparency if banks want to continue growing their client books.