Hard-pressed Standard Chartered, which appeared at one point to be downgrading private banking as a significant revenue stream, has done a smart about-turn, putting a spectrum of wealth services from the ultra-rich to the emerging affluent individual at the centre of a strategy to generate vital new earnings
When Shayne Nelson suddenly left last year as chief executive of Standard Private Banking, taking a job as group chief executive of Dubai’s Emirates NBD, the resignation sparked industry talk that the London-based but Asia-focused bank was downgrading financial advisory operations as a business line. Perhaps significantly, it took several months to find a successor CEO in the shape of Michael Benz, chief executive for wealth management Asia-Pacific at Bank of America Merrill Lynch.
In a series of investor presentations, Standard Chartered (SC) is now strongly promoting both private banking and wealth management as major revenue-producing lines, slated to producing double-digit assets growth. Still, it hasn’t produced really detailed plans on exactly how many new advisory staff it will hire up to make the businesses a winner in the highly-competitive global wealth industry.
Much of the new SC game-plan centres of what it calls "client adjacencies" involve cross-referrals for business within the group, particularly between private banking and the commercial and corporate divisions. It will also pay greater attention to "client lifecycles", migrating clients across various business segments as their businesses and net worth grow.
SC’s presentations follow wide investor criticism of the bank, whose 10 years of record earnings abruptly ended in 2012. Last month, it reported a 16% fall in third quarter operating profit from a year ago, due to restructuring of its business and an increase in bad loans amid repeated profit warnings.
In the three days of investor charm offenses held in Hong Kong in early November, SC unveiled a restructuring which will see it cut about 8% of its global network of more than 1,200 branches to save $400m a year.
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Much of its new growth will instead come from a combination of high-end private banking and wealth management services for the emerging wealthy. Both operations devour relatively little fresh capital, valuable for a bank like SC, which has had to deny it needs a big capital-raising exercise from shareholders to invest in its ailing businesses.
The key targets are to increase assets under management (AuM) in its wealth management and private banking businesses by 10% or more next year. These businesses totalled $66bn and $56bn respectively, as of the end of June.
In retail businesses, where Standard Chartered has more than 10m customers in 34 countries, it plans to put more focus on its 1.6m priority retail customers and 400,000 business clients.
For private banking, SC plans to increase the number of relationship managers it employs, although it declined to give a number for the new recruits although it does aim to add around 2,000 new private banking clients, many from referrals. The private banking business uses six advisory and booking centres worldwide and employs 374 relationship managers. Average assets under management per client amount to $5m.
Similarly, it aims at hiring an undetermined number of "wealth specialists" to increase its wealth management client base from the two million at the end of the first half of 2014 by another 5% to 10% during 2015. It intends to expand its portfolio advisory services from the three markets currently served to more than six.
At the same time, attrition through resignations and other factors among the total 982 advisers employed across the complete wealth groups is forecast to fall to 15% next year from 20% this year.
The bank is also upbeat about growth prospects for the markets for wealthy people, particularly in Asia. There’s $14trn in financial wealth across the bank’s footprint, a total due to grow to $25trn by 2018. There are 2.2m high net worth investors in the footprint, a total growing by 1.7% times the global rate, according to the presentations.
Greater China is the biggest source of SC’s wealth management income (46%), followed by ASEAN (27%), MENAP (8%), North East Asia (6%), Africa (4%) and Europe (4%).
Finally, SC’s presentations include detailed information on its private banking and wealth management businesses, data not usually disclosed by the bank.
Private banking produced $173m of pre-tax profits during 2013 after producing $586m of income. In the first half of 2014 pre-tax profits were $71m, a 12% reduction on the $81m reported a year earlier. Although income increased by percent from $301m to $314m, this was more than offset by a 7% increase in expenses to $227m.