Almost two years since Sally Tennant took over Kleinwort Benson, the mid-sized UK merchant bank has been powered up with acquisitions, key appointments and a family office initiative. She speaks to Nicholas Moody about what lies ahead.
Small enough to be nimble, large enough to lend – that’s the sweet spot that Sally Tennant wants to target at Kleinwort Benson. But don’t make the mistake of calling the UK merchant bank a boutique.
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"We are a mid-sized player. A boutique implies that you only do one or two things. The beauty of our business model, and the reason why we’re in a good position, is we can lend, invest money, do cash management and corporate advisory," says Tennant.
This differentiation is important in the re-configured services Kleinwort Benson wants to bring to its two segments of particular focus: entrepreneurs and family offices.
Tennant says the bank wants to help its clients create, conserve and enhance their wealth – with an emphasis on the enhancement. For private clients that means those with £1m and above, for entrepreneurs and family offices on the corporate advisory side it is in the £50-£500m range.
"We should be there to help wealth creators, entrepreneurs, earlier on in their life cycle, before they’ve made a lot of money. Which is why we’re a bank and we’re keen to lend. It is why we’ve got a corporate advisory team that can help our clients, and advise them as their growing their business," she says.
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By GlobalDataFocussed on families
This approach is interesting too for family offices, especially those interested in co-investment – another area Kleinwort Benson looks to explore as it builds out its ultra high net worth offering: Private Investment Office.
A year ago it bought the family office Karrig Strategic Capital and integrated it into Kleinwort Benson to create the Private Investment Office.
The aim is to provide outsourcing services for families who are not of the scale to have everything in house. This can range from consolidated reporting and risk management to creating bespoke investment committees to assist on asset allocation.
Tennant says the initiative has got a lot of traction and interest from family business and families setting up – its first-half results for 2012 reported it had over £300m in assets under advice in the unit.
"The first big piece of business we won this time last year was around a family who had an existing provider that they’d lost confidence in because they felt the provider was conflicted," she says.
"They felt the supplier was pushing too much product and trying to sell their services, as opposed to being independent."
Brusque restructure
It’s been more than 18 months since Tennant took over as chief executive, moving from Lombard Odier where she had been head of its UK-based banking operations since 2007.
The bank she inherited had been badly bruised by successive changes in ownership, firstly in 2006 when its owner Dresdner Bank was bought by Allianz.
Dresdner, along with Kleinwort Benson, was sold to Commerzbank in January 2009 before it was sold again in October 2009 to private equity funded RHJ International.
Tennant has set about a brusque restructure, investing in technology, people and areas of focus. The acquisition of Close Brothers offshore business in March 2011 brought a £600m loan book and £2.3bn in assets under management (AuM).
Tennant has made a host of high-level hires since then, taking on John Boyce as chief technology officer, Danny Vogt as chief operating officer, Stephen Rothwell to head its wealth management division and Mouhammed Choukeir, as chief investment officer.
Its half-year results showed the new business is resilient, rather than rewarding. Operating pre-tax profit was £4.4m, while AuM remained static at £5.2bn, despite the low levels of client activity.
Operating expenses of £45.5m were 7% lower than last year, with the tough market conditions leading the bank to revise its remuneration policy towards fee income.
Powering up
Now it is all about powering up; the reconfigured unit is focussed on the future – which for the moment means organic rather than acquisition-led growth and consolidating what it has already got.
"We do plan to be international, but not open offices globally around the world. We have Singapore, UK onshore and offshore, and a Munich office, and for the time being that serves us, and our clients, nicely."
Despite the September agreement to buy Deutsche Bank’s BHF Bank by Kleinwort Benson Group, the UK bank’s international parent, Tennant says the two wealth management businesses will continue to be run independently.
"We will clearly look to see if they’ve got ideas, products, resources, that we can both leverage off each other. But there are absolutely no plans to integrate," Tennant underlines.
With this strong financial backing, Kleinwort Benson is well-placed to push on further in the next two years.
