Perpetual looks to partner in UK…
Santander compensates Madoff investors…
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Cost control keeps Barclays lean…
SocGen, CA agree to merge fund units…
Hedge funds face regulators…
STRATEGY
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By GlobalDataPerpetual looks to partner in UK
Perpetual, Australia’s sixth-largest private banking business,
is looking to partner with a UK private bank to help serve its high
net worth clients internationally.
John Nesbitt, Perpetual’s CEO, spent a week in the UK holding
meetings with wealth managers in the country, though he declined to
say who he was speaking to. Nesbitt said he was looking for a
tie-up with a private bank with a complementary model to
Perpetual.
“We are just looking for a relationship with a UK private
banking business, preferably in the boutique area, which does not
have high net worth operations in Australia,” he told PBI.
“We’re hoping we can co-operate in situations where we have clients
working over here for six months of the year and, if people want,
outside those areas too.”
Perpetual, whose private banking business had A$7.7 billion
($5.1 billion) in assets under management in June 2008, is
Australia’s oldest and largest trust business.
STRATEGY
Santander compensates Madoff investors
Clients of Santander private bank, which lost money on
investments following the liquidation of Bernard L Madoff
Investment Securities, have been offered preferred shares in the
Spanish bank in an effort to placate them.
The bank said it would “offer a solution” to clients invested in
Optimal Strategic, its US equity fund, which would pay back the
principal amount invested, net of redemptions, in the form of
preferred shares with a coupon of 2 percent. Santander will have
the option to buy back the shares in year 10 of the scheme under a
call option. The offer does not include institutional clients.
“The group has taken this decision in view of the confluence of
exceptional circumstances in the case at hand and on the basis of
exclusively business considerations, namely the Group’s interest in
maintaining its business relations with those clients,” a spokesman
said.
Santander said the pre-tax cost of the gesture would be €500
million ($644 million), which it booked against its 2008 figures.
In its results announcement, Santander announced profit in its
Latin American private banking operations increased 17 percent to
€522 million.
Most of that was from its operations in Brazil, where it is the
fifth-largest player by assets under management (see PBI
244). It did not break out global private banking figures in
its annual results presentation.
RESULTS
Cost control keeps Barclays lean
Profit before tax at Barclays Wealth – winner of PBI’s
Outstanding Wealth Strategy award last year – increased 12.3
percent to £345 million ($502 million) in 2008, excluding the
impact of the disposal of its closed life business.
Profit increased 119 percent including the £326 million sale of
the unit, which contributed £104 million before disposal. Income
for the year was exactly in line with the previous year, but
operating expenses were reduced by 4 percent, generating the
improved profit figure.
Total client assets increased 10 percent to £145.1 billion, with
net new asset inflows and the acquisition of Lehman Brothers North
American business offsetting the impact of negative market
movements and the sale of the closed life business.
The bank reported growth in deposits and lending, which was
partly offset by the impact of lower equity markets on fee
income.
It also saw a hike in loan impairments from a low base of £7
million in 2007 to £47 million in 2008.
“This increase reflected both the substantial increase in the
loan book over the last three years and the impact of the current
economic environment on client liquidity,” according to the results
statement.
Overall, profit after tax at the bank increased 4 percent to
£5.3 billion.
RESULTS
Deutsche Bank hit by DWS write-downs
Deutsche Bank’s Asset and Wealth Management division made a full
year pre-tax loss of €860 million ($1.1 billion) following a charge
on intangible assets relating to DWS Scudder, its asset management
business in the US, and injections into money market funds.
These injections included a provision of €39 million in relation
to Deutsche’s commitment to repurchase auction rate securities
(ARS) at par from retail clients following a settlement in the US
(see PBI 242).
Deutsche Bank’s Private Wealth Management unit, which serves
high net worth clients and families, saw net inflows of €10 billion
in 2008, though there was a decline of €8 billion in the fourth
quarter. In the Private and Business Clients business, a separate
segment which focuses on providing private individuals and small to
medium-sized businesses with traditional banking products, saw a
decline in profit of 18 percent for the full year, at €945 million.
Nevertheless PBC acquired 230,000 new clients in the fourth quarter
and 800,000 for the full year, along with €15 billion in new assets
for 2008.
MARKETING
HSBC launches $10 million rebrand
HSBC has launched a $10 million rebrand of its global private
banking operations to bring it into line with the bank’s retail and
Premier businesses.
A bank spokesperson said the move was a result of a review of
its marketing and communications globally and would replace its
former Assume Nothing campaign, which had been mis-translated in
some territories as ‘Do Nothing’.
In an interview with the Financial Times, Chris Meares said the
bank was “challenged by the fact we can do only what clients want
to do – and they want to sit in cash”. That put strains on
traditional private banking models, particularly when clients say
they want to invest execution-only with no fees, he said.
“In the UK, you can’t get away with a custody charge, and we
can’t turn around and say we’ll give no advice. We’ve got to get
more done under the mandate,” he said in the interview.
REGULATION
UBS faces wider tax case
US tax investigators believe the number of American clients UBS
allegedly helped avoid tax could be higher than the 17,000 first
thought.
The Wall Street Journal reported several people involved in the
case as saying investigators were also looking into whether other
parts of the bank were involved. UBS denies any wrongdoing. New CEO
Peter Kurer said in a January presentation it was prioritising a
settlement with the Department of Justice on the matter in 2009 and
a recovery of the bank’s reputation.
UBS first became embroiled in the controversy in 2007 after a
tip-off from Bradley Birkenfeld, a former executive at the bank. He
said it had been advising clients since 2002 that US clients did
not need to disclose their identities to the Internal Revenue
Service (IRS).
In a July 2008 statement, the Department of Justice issued a
statement saying a federal judge in Miami had issued an order for
the bank to produce records identifying US taxpayers with accounts
at UBS in Switzerland who elected to have their accounts hidden
from the IRS.
There has also been speculation UBS is looking into a sale of
the US business, with reports it held talks with Wachovia
Securities and Morgan Stanley late last year.
RECRUITMENT
EFG hires in Asia-Pacific,
launches Chinese brand
EFG International has moved to
enlarged offices in Hong Kong as it continues to hire client
relationship officers in the Asia-Pacific region.
Despite job cuts and cost cutting at many
universal and investment banks, EFG has moved to Austin Road, West
Kowloon, in anticipation of further expansion over the next few
years. EFG said most of its new hires had come from rivals
including UBS, Citi, ABN AMRO, HSBC, DBS and Fortis.
The bank said its Asia business, and Hong Kong
in particular, was growing quickly, with an increase in assets
under management in the first six months of 2008 up 20 percent,
though that will have been tempered by a difficult second half of
the year. In a mid-November business update, EFG said overall
clients’ AuM had been impacted by negative investment performance
and market conditions. It said it would declare full year results
on 25 February.
In Asia, the business now operates in Hong
Kong, Singapore, Bangkok, Jakarta, Manila and Taipei. It also
announced it was introducing its Chinese name to the region,
瑞士盈豐銀行.
MERGERS AND ACQUISITIONS
SocGen, CA agree to merge fund
units
Société Générale and Crédit Agricole have signed
an agreement to create a top 10 global player in asset management
with combined assets under management of €638 billion ($822
billion).
The new entity’s ownership structure is 70:30
in Crédit Agricole’s favour. It includes the asset management arm
of Crédit Agricole, and the European and Asian businesses of SGAM,
Société Générale’s asset management business, as well as its asset
management subsidiary in the US, TCW.
The unit will have more than €1.8 billion of
net banking income and €0.9 billion of gross operating income. The
deal creates three major benefits, according to the banks: a
tailored product offering for institutional and retail clients,
reduced production costs and extended geographical coverage.
It extends the co-operation between the two
banks, which were tipped to join up on a wider level when SocGen
ran into trouble at the start of 2008 following its €4.8 billion
loss from rogue trader Jérôme Kerviel. They also have a significant
brokerage joint venture, Newedge, a global top five player in
derivatives clearing and execution.
PRODUCTS
Handelsbanken top on structured
products
Handelsbanken has regained its
position as the largest player in the Swedish capital protected
products market after increasing its market share by 2 percentage
points to 18.2 percent in 2008.
Swedbank, with a market share of 17.8 percent,
was second, Nordea, with 13.9 percent, was third and SEB was fourth
with 11.9 percent.
In 2008, new savings in the products in Sweden
totalled SEK46.1 billion ($5.6 billion), according to VPC AB (the
Swedish Central Securities Depository and Clearing Organisation),
down from SEK94.7 billion in 2007. The money was mainly invested in
equity-linked bonds.
Structured products have been criticised by
some investment managers for offering unlimited downside risk and
limited upside as counterparty risk becomes an increasingly real
concern. Following the collapse of Lehman Brothers, some customers
with Lehman issued products lost 100 percent of their investments
on products which had been branded “capital-protected”.
Mats Nyman, a sales strategist for the
products at Handelsbanken, said the decline in Sweden was more to
do with a shaky investment environment than investors turning their
back on capital protected products. He added the decline in new
savings in the products needed to be set in the context of outflows
at equity funds and individual share portfolios across the
industry.
MERGERS AND ACQUISITIONS
Citi looks at Nikko
sale
Citi could be ready to start
listening to bids for Nikko Cordial, its Japanese brokerage,
according to local press reports.
The US banking giant, which recently reported
an $18.7 billion loss and announced wide-ranging changes to its
business structure, has repeatedly denied suggestions it would
offload the unit.
Following the loss and Citi’s partial sale of
its Smith Barney brokerage to Morgan Stanley, Nikko could become
the latest to be sold off as the divestment process at Citi
accelerates.
According to Japan’s Kyodo news service,
sources said Citi was studying selling of Nikko to some of Japan’s
top banking groups and an auction was expected to begin soon. It
said bids were expected to be several hundred billion yen. Nikko
Asset Management was also said to be on the block.
Though it is reported Japan’s largest banking
group, Mitsubishi UFJ Financial Group, could be interested, it
remains unclear how many Japanese banks would be able to fund a
purchase given their shaky financial position. The Bank of Japan
recently announced a bailout package to buy back equities held by
banks because of large losses on their investments.
PEOPLE
New UBS Japan chief targets
cross-selling
UBS has appointed Toshiharu Kojima,
the former Nikko Salomon Smith Barney CEO, as head of its Japan
operations.
He will formulate and implement UBS’s business
strategy in the country, including at its wealth and asset
management units. The bank is looking to take advantage of the
relaxation of firewall regulations in Japan, which will allow
subsidiaries to consolidate operations and provide greater
cross-business synergies. Kojima is also looking to step up
cross-selling between the investment bank, asset management and
private bank.
Kojima’s 35-year career started at Nomura
before moving to Salomon Brothers Asia in 1983. He is most well
known for his CEO role at Nikko Salomon Smith Barney, the
Citigroup/Nikko Cordial joint venture, which he held between 1999
and 2004.
He will report to Rory Tapner, UBS’s Asia
Pacific chairman and CEO, and Jerker Johansson, head of the
investment bank.
Kojima is also in charge of the business’s
regulatory relationships, as well as charity and community affairs
programmes.
REGULATION
Hedge funds face
regulators
Hedge fund managers were summoned
before a UK government committee to explain their role in the
current financial turmoil as pressure mounts for the industry to be
better regulated.
Representatives from Black Rock, Marshall
Wace, The Children’s Investment Fund and NewSmith Capital Partners
appeared at the hearing. As well as being grilled about making
money from short-selling banks, they were also questioned on
self-regulation in the industry, which currently operates through
the Hedge Funds Standards Board (HFSB).
In a memo to the UK committee, HFSB said there
was no need for large scale financial reform of hedge fund managers
in the UK, which had behaved responsibly. But it said it was
working with international bodies, “delineate a global approach to
hedge fund standards”.
Only 36 members are signed up to the body so
far. Yet despite regulatory scrutiny, institutional managers remain
largely committed to hedge funds, according to a report from SEI, a
US processing and asset management business, and consultants
Greenwich Associates. But they are increasingly demanding higher
levels of transparency, client reporting and communication with
managers.
