Credit Suisse is building on its established
investment banking and asset management business in Japan by
entering the private banking market, starting out with a branch in
Tokyo. William Cain looks into the move and
studies how other foreign banking groups have fared in the
country.
Credit Suisse has launched
private banking services in Japan, the world’s second-largest
wealth market, as it looks to gain a share of the country’s
difficult-to-capture high net worth clients.
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The new operation will complement the
Swiss bank’s investment banking and asset management businesses in
the country, which have been established for 40 years.
Anuj Khanna, managing director and head of
private banking North Asia, told PBI: “Our plan is to provide
private banking services in Japan through the Credit Suisse Tokyo
branch and its securities entity, Credit Suisse Securities. Our
target clients are wealthy Japanese individuals, families and
corporations that are becoming increasingly sophisticated and
demanding more individually tailored products and services.”
Tani to head
operation
Junya Tani, who joined Credit Suisse from
UBS Securities Japan over the summer, has been appointed head of
the business in Japan. Prior to UBS he had roles at Citigroup,
where he was head of private banking product development, and Bank
of Tokyo.
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By GlobalDataThe news comes as Barclays and Sumitomo
Mitsui were reported to be looking at setting up a wealth
management unit in Japan, possibly a joint venture.
The country has proved a tricky market for
foreign wealth managers, which have struggled to pick up market
share despite its 903,000 households with more than ¥100 million
($1.1 million) in financial assets. Those households had a total
net worth of ¥254 trillion at the end of 2007, according to Nomura
Research Institute (NRI). Citigroup, whose private banking business
was kicked out of the country in 2004 for regulatory breaches, is
the most high profile failure in the country, though others have
entered the market only to withdraw later.
The wealth offering from both foreign and
domestic businesses is weak by European and US standards, with few
businesses providing the full spectrum of HNW advisory
services.
They have been hindered by a lack of
demand, particularly from business owners who made their money
after World War II, and regulations which prevent banks building
universal models.
Japan’s wealthy are also more cautious
than those in the wider Asia-Pacific region, with a preference for
lower risk products that are harder to earn fees and commissions
from. HNW clients typically hold between 35 and 40 percent of their
assets in low-yielding bank accounts, with a slightly lower
percentage held in equities. Fixed income mutual funds are also
popular.
Intergenerational
transfers
While growth in the Japanese wealth market
in the last decade has been slow, private banks are increasingly
optimistic conditions will improve as regulations are relaxed and
the number of intergenerational wealth transfers increases.
NRI estimates the number of heirs will
increase from 840,000 in 2007 to 1 million in 2015, with the total
amount of wealth transferred increasing from ¥84 trillion in 2007
to ¥102 trillion in 2015.
Banks have been targeting mass affluent
customers in the country in an effort to offer them private banking
and wealth management services after they inherit.
MERGERS &
ACQUISITIONS
Resona combines trust and retail
operations
Resona, Japan’s fourth-largest bank, has
concluded a merger between its retail and trust banking businesses,
in an attempt to improve the service offered to its wealth
management clients. Resona Trust & Banking Company (RTB), which
looks after pensions, corporate trusts, asset management product
planning and consulting for the bank, is being folded into the
Resona Bank (RB), Resona Group’s retail banking franchise.
Resona, primarily a small and medium-sized
business lender, is aiming to strengthen its trust business by
cross-selling pension and investment planning to corporate
customers. The trust business has around ¥17 trillion ($188
billion) in assets under management, with ¥7.5 trillion in pension
trusts and ¥33.3 trillion in securities trusts under management or
custody.
A bank spokesman said: “Testamentary trust
services are among the unique functions that Resona can offer and
enable us to cross-sell products and services.”
The decision was announced after receiving
regulatory approval by the Japanese government. Banks in the
country have faced tough “firewall” restrictions, which restrict
their ability to offer clients services across different
departments of the bank. But the government has shown recent signs
of relaxing the policy, and others may now follow Resona’s lead in
merging subsidiaries to offer a wider range of services to
clients.
The spokesman added: “The planned merger
between RTB and RB will further strengthen our trust banking
capabilities, help us maintain and further improve our specialized
know-how in trust banking operations and raise the quality of
services we deliver to customers.”
The move is also designed to help the
Osaka-based bank tap into the rapidly growing transfers of
inter-generational wealth.
