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May 1, 2008updated 04 Apr 2017 3:58pm

How to flourish in a credit crisis

After spending 12 years in Asia, Nik Rossinsky, managing director and global market manager for SG Private Banking in the ASEAN markets, has seen his fair share of credit crunches. In fact, he was in the thick of the action in Indonesia during the 1997-1998 banking crisis.

By Titien Ahmad

After spending 12 years in Asia, Nik Rossinsky, managing director and global market manager for SG Private Banking in the ASEAN markets, has seen his fair share of credit crunches. In fact, he was in the thick of the action in Indonesia during the 1997-1998 banking crisis. Titien Ahmad reports.

With the current gloom and doom facing the financial services industry, Nik Rossinsky foresees that “the coming year will be challenging for many investors, some of which are affected in the US subprime crisis. With the volatile markets, clients have become more risk averse. Capital protection is becoming increasingly important despite the fact that this strategy compromises potential payoffs.”

In an interview with PBI in SG Private Banking’s sleek new office in Raffles Quay, Rossinsky stressed that “unlike the bigger players on the market, SG Private Banking is a medium-sized player and quick to react in order to offer complete solutions and expertise to our high net worth clients.”

He added, “SG Private Banking is pretty well known for innovation in terms of financial engineering. The volatility is the downside of the current situation but it also creates opportunities. You now need to create products that protect capital so that clients who are conservative can have the reassurance of that protection.”

Rossinsky sees the private banking market, especially in Asia, moving forward at a fast pace driven by new wealth and new markets. According to the World Wealth Report 2008, emerging markets such as Eastern Europe, Latin America and Asia-Pacific were the highest growth regions in 2007 for high net worth (HNW) population and wealth. Asia’s HNW population grew by 8.7 percent from 2006 to 2007 against Europe’s growth of 3.7 percent, while the region’s wealth grew by 12.5 percent compared to Europe’s 5.3 percent.

Rossinsky has been expanding the on-the-ground presence for SG throughout the Southeast Asian region with offices in Brunei and the Philippines – markets other private bankers have chosen to service from a hub in Singapore or Hong Kong.

“In 2005, SG Private Banking Asia Pacific, through its legal entity SG Financial Consulting Services Pte Ltd obtained the license to operate wealth management services in Brunei and in 2006 expanded into Manila in the Philippines,” he noted.

“We were the first private bank that set up in Brunei to be a wealth manager and financial advisor. The potential client in Brunei likes continuity, steadiness and having things they need around them. Being there shows our commitment to the market and we have seen that the loyalty factor increases when we have people on the ground,” he said.

Rossinsky is in the process of setting up an office in Bangkok and sees more to be done in Vietnam, Thailand and Malaysia. He sees “a lot of wealth being created. There is a new sense of entrepreneurialism in markets like Indonesia and Malaysia that creates a lot of new wealth with a new generation of entrepreneurs. We have to be attuned to evolving opportunities in these markets to catch the trend.” However, his growth ambitions are not without challenges.

“As wealthy individuals have multiple banking relationships to diversify their investments, there is increasing pressure and competition among the banks,” he concedes.

“There are a lot of private banking players in the market. The first and foremost challenge is building an adequate degree of differentiation and I think we are fairly successful in coming up with new and innovative ideas – we allow people to invest in wine and distressed debt that has a big upside. We structure products around such ideas and this helps differentiate us.”

Rossinsky sees an increasing level of sophistication among his customers who know how to take advantage of opportunities in a distressed market.

“The average HNW individual is becoming more and more – and rightly so – focused on returns and is price sensitive. The relationship with your private banker still counts but it is not as prominent as it was 10 years ago; people are becoming more product-savvy,” he observed.

“Another challenge that many private banks now face is that of recruitment. With the recent financial crisis, private banks are now more cautious on hiring. The escalating costs of onshore expansion, economic slowdown and repercussion of the US subprime credit crisis are threatening the growth bubble of the private banking industry.”

In an industry where reputation is key, Rossinsky does not see the recent rogue trading scandal at parent Société Générale as affecting the region’s private bank operations.

“In terms of client reaction, there were some questions of course. We received phone calls but the management in Asia handled it quite well and we were able to assure clients that there was nothing to worry about.

“SG Private Banking is not affected by this isolated incident,” he stressed. “The fraud concerned very specific activities [proprietary trading in the corporate & investment banking arm] and has been isolated. It has no impact on the bank’s client activities and products.”

SG Private Banking’s assets under management have grown above 30 percent per annum on average since its establishment in 1998. In Asia, the bank manages around $20 billion and Rossinsky is still optimistic on the outlook of the region.

“In general there is still a positive outlook for private banking in the coming years despite some downside on the financial markets and global economy as a result of the financial crisis. The private banking market, especially in this region, is still moving forward at a high pace, with the new creation of wealth and new markets emerging.”

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