National Bank of Canada is expanding its private banking business outside its home province of Quebec into Western Canada to capitalise on the wealth generated by that region’s oil and gas industry and real estate development. Robin Arnfield investigates
Founded in 1859, Montreal-based National Bank is the smallest of Canada’s ‘Big Six’ banks (Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada), with its wealth management assets largely concentrated in Quebec. However, it is expanding its Private Banking 1859 operation’s footprint across Canada in tandem with a move to expand its retail banking presence from Quebec into other key Canadian provinces.
Private Banking 1859 is National Bank’s brand for its private banking and high and ultra high net worth (HNW/UHNW) wealth management business. Since Eric Bujold, president and CEO of National Bank’s private banking business, founded Private Banking 1859 in 2009, its assets have grown to C$17bn ($13.03 billion) without any acquisitions, while private banking market leader Bank of Montreal (BMO) has C$25bn ($19.17bn) under management throughout Canada.
“The other big Canadian banks have been in the market for 25-30 years, but we’ve only been there since 2009,” says Bujold. “We have a small presence in Ontario, especially in Toronto, and now we’re focusing on Vancouver and Calgary. The next step will be to expand across Canada.
“We’re the third biggest player in private banking in Canada, but our private banking and wealth management assets are concentrated in Quebec. The only way we can grow is to go outside Quebec, and we have aggressive expansion plans,” adds Bujold.
National Bank operates NatBank in Florida to cater to clients escaping the Canadian winters in the US state.
In January 2016, National Bank opened its first Western Canadian private banking office in Calgary, the provincial capital of oil-rich Alberta. It opened an office in Vancouver, British Columbia, in June 2016.
The offices are branded both as National Bank and Private Banking 1859. National Bank’s private banking business was originally titled Private Wealth 1859, but, as part of the move into Western Canada, it was renamed Private Banking 1859. In Quebec, the unit is called Gestion Privée 1859 (private management), as this resonates better with French-speakers, says Bujold.
“Our Vancouver private banking office is on Alberni Street, Canada’s equivalent to Los Angeles’ Rodeo Drive, and is really high-end to show we are focusing on ultra-wealthy clients. Also, we’ve situated the office at street level, rather than on the top floor of a banking tower, to promote our brand,” says Bujold.
National Bank differentiates itself through its “customised solutions and personalised service”. Adds Bujold: “We are big enough to deliver and small enough to care for our clients.”
According to Celent Senior Analyst, Will Trout, the Private Banking 1859 offer is “both deep, with an experienced cadre of advisors, and broad”.
“The idea is to provide comprehensive financial advice that will stand up to the strong offers of Canada’s Big Five banks. Also, Private Banking 1859 can offer services from other parts of the bank, such as online brokerage, which is a huge business for National Bank,” he says.
National Bank’s geographic expansion makes sense from a strategic standpoint, adds Trout. “Toronto is saturated in terms of wealth management coverage, and National Bank ‘owns’ Montreal. Going West makes sense.”
Bujold says National Bank made a point of hiring the best talent it could find in Calgary and Vancouver. “These people really know the local private banking markets, as Calgary and Vancouver require different strategies,” he says.
National Bank is leveraging its existing investment banking relationship with clients in the Albertan oil and gas industry to offer them private banking services. “Our investment banking clients told us that, if we offered private banking in Calgary, they would go with us,” Bujold says.
National Bank’s open architecture for private wealth management allows for no conflict of interest when offering advice, says Bujold. “Although National Bank has its own investment management products, it exclusively uses third-party money managers.
“Because we are relationship-based, not product-based, we are the closest of the Canadian banks to a family office firm. Also, we are not silo-oriented.”
Celent’s Trout says that while building a robust wealth practice is only a first step, getting HNWIs to actually move their business to Private Banking 1859 is “another story”. According to him, because the National Bank brand isn’t strong outside Quebec, Private Banking 1859 needs to focus on specific segments where it can compete.
“Foremost among these segments are entrepreneurs/small business owners. Their finances are inevitably wrapped up in their business and can be complex. This complexity plus the risk involved in being a small business owner can weigh on profitability from a servicing standpoint, and has left this population somewhat underserved by the Big Five,” Trout says.
“Vancouver is a locus for entrepreneurs, and their technology orientation means there is significant upside for wealth managers. National Bank wants to convey a note of dynamism that will naturally appeal to start-up bosses as well as established segments in the immigrant community, especially the Chinese, who don’t feel loyal to the established Canadian banks,” adds Trout.
On 1 July, Martin Gagnon took over as National Bank’s Executive Vice-President – Wealth Management and Co-President and Co-CEO of National Bank Financial. Gagnon replaced Luc Paiement, who will act as an Executive Advisor to the bank. National Bank Financial is the bank’s wealth management division with revenues in 2015 of C$1.39bn. It was formed in 1999 through a merger between Lévesque Beaubien Geoffrion and First Marathon Inc.
According to Trout, what is especially interesting is the “bi-furcated nature of National Bank’s Western Canada strategy”. “Depending on the direction of oil prices, the Private Banking 1859 leadership may or may not look like geniuses for building out their Calgary presence. Clearly, they feel there is enough established personal wealth in Alberta to withstand the current downturn. Given the low interest rate environment, fee income is the name of the game now.”
However, Bujold believes the biggest growth opportunities occur during a time of downturn or difficulty. “We got UNHW entrepreneurs to the opening of our Calgary office and told them we’re committed to the city’s entrepreneurs and won’t be distracted by oil prices. In Vancouver, there’s a big opportunity among the wealthy expat Chinese, who have been buying real estate.”