Asia’s private banking sector will consolidate further as the costs of serving wealthy clients make the business profitable for only the big firms, says Francesco de Ferrari, the head of Asia-Pacific private banking at Credit Suisse Group.
Speaking at Reuters Wealth Management Summit in Singapore, de Ferrari said with a cost-to-income ratio of at least 80%, most private banks are losing money even as the ranks of the rich explode in fast-growing Asia.
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"The industry at the current cost-to-income ratio is not really sustainable," de Ferrari said. "So we will see a lot more consolidation in the private banking industry over the next three to five years in Asia for sure."
Their need for a variety of products and services means banks must have investment and private banking operations that "are very focused on partnering together to service these clients," de Ferrari said.
"It will be very hard to approach them with traditional wealth management solutions," he added. "They are looking for what we call private-investment banking type of services."
Credit Suisse tracks how much business the private bank brings to the investment bank, he said. The target is for this "collaboration revenue" to be 18-20 percent of overall group’s net revenue.
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By GlobalDataIn Asia, de Ferrari said, collaboration revenue leapt 125% in 2012 and is growing at more or less the same pace this year because clients in Asia for Credit Suisse’s private and investment arms are often the same.
"The private bank in Asia is profitable. We have been growing extremely well over the past two years," de Ferrari said, declining to discuss profit figures.
"Right now we are focused on really scaling the business in the five booking areas – Singapore, Hong Kong, Australia, Japan and Switzerland," he revealed.
The entire industry is now more selective with acquisitions, he said, but Credit Suisse would consider moves to expand its onshore network if there were suitable opportunities in places where Credit Suisse wants to grow, including Indonesia.
"We are growing north of CHF20 billion a year," he said. "When you can generate organic growth in your business of that size, you look at doing an acquisition very carefully because there are not a lot of players of that size," Reuters quoted him saying.
