asia pb contents - euromoney private... · 2013-07-18 · art banking and numismatics 30.1 29.7...

July 2013

Asia PB Cover V2.indd 256 04/07/2013 15:57

C

M

Y

CM

MY

CY

CMY

K

PB EuroMoney-210X286mm OL.pdf 1 6/26/13 9:57 AM

�is guide is for the use of professionals only. It states the position of the market as at the time of going to press and is not a substitute for detailed local knowledge.

Euromoney Trading LtdNestor HousePlayhouse YardLondon EC4V 5EXTelephone: +44 20 7779 8888Facsimile: +44 20 7779 8739 / 8345

Chairman: Richard Ensor Directors: Sir Patrick Sergeant, �e Viscount Rothermere, Christopher Fordham (managing director), Neil Osborn, Dan Cohen, John Botts, Colin Jones, Diane Alfano, Jane Wilkinson, Martin Morgan, David Pritchard, Bashar Al-Rehany, Andrew Ballingall, Tristan Hillgarth

Advertising production manager: Amy Poole

Printed in the United Kingdom by: Wyndeham Group

© Euromoney Trading Ltd London 2013Euromoney is registered as a trademark in the United States and the United Kingdom.

Contents A decade of private banking By Helen Avery 2

A leader in wealth management China Minsheng Banking Corp 4

Chinese private banking grows up By Kanika Saigal 6

A new generation of wealth emerges China Merchants Bank 8

10th Private banking survey global and regional results and data 10

Wealthier, wiser clients test China’s banksBy Simon Parry 22

Asia PB Contents.indd 1 04/07/2013 16:11

Euromoney celebrates the 10th anniversary of its private banking survey this year. It has been a decade of changes driven by globalization and transparency. Despite a global financial crisis, a eurozone meltdown and a regulatory overhaul, the top-five global private banks have retained their standings

A decade of private banking

By: Helen Avery

Private banking

©Reprinted from Euromoney magazine February 2013 Copyright Euromoney magazine www.euromoney.com2

Market volatility re-

mained high in 2012

as the eurozone crisis

intensi�ed, fears per-

sisted about China’s

slowing growth, and the US offered its own

uncertainties with an election and a �scal

cliff. For the world’s private banks, it was

a continuing battle to �nd yield for clients

and to protect their wealth from geopo-

litical risk – all in the face of increasing

regulatory requirements and pressure to

cut costs and increase revenues. The cost of

compliance is 10% of the turnover of pri-

vate banks and wealth managers, according

to research by ComPeer. “With costs and

the time that is required to be compliant

with the tsunami of regulations that have

been introduced over the last decade,

only those truly committed are

able to maintain a busi-

ness today,” says Bruce

Weatherill, a private bank-

ing consultant and board

member of ComPeer.

It is a marked change from

when the �rst Euromoney

private banking survey was

published in January 2004. Back

then the private banking industry

was enjoying rapid growth. Survey

participants reported growth in

assets under management over 2003

to be 16.7%. This year participants report-

ed annual AUM growth of just under 11%.

In 2003, markets were reliably producing

annual double-digit returns, M&A activity

was everywhere, salaries were climbing

and the biggest concern was how to keep a

client’s money secret. Private banking was

an industry that everyone wanted to be

in. Local retail banks started to

add private banking capabilities.

Those serving the super-af�uent

branched into the higher-net-

worth segments and vice versa.

In the 2004 survey, respondents

claimed to be offering services in

every wealth stream from super-

af�uent to ultra-high-net-worth.

This year,

there is a stark contrast. Respondents have

had to home in on where their strengths lie

and have begun to focus on speci�c wealth

segments. Now their responses reveal

that they do not want to be everything to

everyone. “At a business-model level there

has had to be a dramatic adjustment in

expectations over the past decade,” says

Seb Dovey, managing partner at private

banking research and advisory �rm Scorpio

Partnership. “At the start there was una-

bashed exuberance regarding growth. The

strategies of most wealth managers in this

context have never met expectations. Today

we are in an environment where virtually

all wealth managers are feeling not just

a pinch but a total squeeze. Five years of

relatively static growth makes it dif�cult

for many to endure under their historical

approach to the market.”

As the Euromoney survey celebrates its

10th anniversary, the traditional private

banking characteristic of secrecy and tax

advice dished out in oak-panelled board-

rooms also seems a distant memory. In

2003 tax guidance and advice was offered

by 64% of respondents. Now that �gure

has dropped to 59%, and banks are quick

to point out that they are not tax advisers.

The products and services offered by the

private banks have also changed. Around

80% of respondents 10 years ago offered

hedge fund investments. Now that is

65%. Structured products that were also

the bread and butter for many private

banks have lost their shine. Ten years

ago around 87% of respondents said

they offered structured products; now

that has fallen to 77%. “Over the

last decade, and particular-

ly since trust was lost

over the �nancial

crisis, clients have

wanted simpler

services and

simpler

products,

and that has

had to be

re�ected by

the banks,”

says Weath-

erill.

Philanthropy

has become

more important as the baby boomers have

aged. Only a third of private banks offered

advice on philanthropy in Euromoney’s �rst

survey. Now more than half of the industry

is involved with it.

Private banking has become increas-

ingly transparent, global and modern – in

line with the clients it now serves. (See

how the chief executives of the leading

private banks comment on the differences

in Euromoney’s roundtable on page 62)

Yet some things have not changed. The top

�ve best global private banks ranked in the

survey are the same players: UBS, Credit

Suisse, Citi, JPMorgan and HSBC. It is the

large players with global footprints and

diversi�ed revenue streams that have man-

aged to weather the credit crisis and remain

relevant with high-net-worth clients.

Over the years the top-�ve banks have

jostled for position. This year a shake-up in

the rankings has occurred as the �nancial

crisis settles and those �rms that have spent

the past 12 months focusing on private

banking have made headway. UBS has

returned to the top of the global table after

a three-year hiatus and this year wins the

award for best global private bank. Credit

Suisse had stolen its position, but after

mending its reputation in the US and do-

mestic market of Switzerland, UBS has suc-

ceeded in returning to the position it held

when Euromoney’s survey began. Region-

ally the �rm is back on top. In western Eu-

rope it ranks �rst this year, moving Credit

Suisse to second place. In Asia, too, UBS

has made headway, ousting long-standing

leader in the region HSBC, which this year

moved from �rst to third behind Citi.

JPMorgan also stands out this year. The

bank has made it to third position globally,

up from fourth last year, and across a wide

range of products has made considerable

strides to top-two positions globally, such

as in equity and �xed-income portfolio

management and structured products. It

ranks �rst in its domestic market of north

America and has made leaps up the table in

Latin America. This year it ranks second in

the region behind Citi, which has returned

to a number one position after being

ranked third last year.

Back in the top 10 globally too is Gold-

man Sachs, nudging Barclays out despite

the latter’s big investments in its wealth

management franchise. Indeed a glance

at the top 10 this year compared with

the �rst Euromoney survey shows little

change among the players, emphasizing

the success of the global strategy. Other

than Pictet and MeesPierson, which have

been replaced by Santander and Merrill

Lynch, the top 10 private banks ranked

globally remain the same. Where there have

been notable changes is among the 11th

to 25th positions, indicating the pressures

on those banks of medium size and the

impact of globalization. In a market once

dominated by Europeans, Asia’s banks are

now competing globally. Kotak Mahindra,

Bank of China and China Merchants Bank

now rank among the top 25 private banks

globally.

The world of the wealthy has changed

dramatically over the past 10 years and is

on the cusp of yet further changes as Asia’s

population of wealthy individuals increases,

and as banking and technology collide. Ac-

cording to a study by SEI, Scorpio Partner-

ship and Standard Chartered Private Bank,

high-net-worth individuals spend more

time using digital channels such as email,

instant messaging, social networks and

texting than those lower down the wealth

spectrum. And wealthy individuals in

Asia-Paci�c communicate more via digital

channels than in Europe and the Americas.

The chief executives of private banks high-

light that over the next 10 years technology

will be one of the biggest changes for the

industry. But it means yet further costs for

private banks. In a less pro�table industry

than a decade ago, only those institutions

committed to private banking are likely to

stay the course.

3©Reprinted from Euromoney magazine February 2013 Copyright Euromoney magazine www.euromoney.com

Then and now Key indicators in 2013 and 2004 10th survey First survey

% %

Average of annual AUM growth 10.8 16.7

Services offered (by % of respondents) 10th survey First survey

Art banking and numismatics 30.1 29.7

Corporate advisory for private banking clients 74.4 64.4

Family office services 77.5 53.4

Islamic banking services 17.8 28.8

Offshore services 68.4 75.4

Philanthropy services 50.6 32.2

Tax guidance and services 58.9 63.6

Asset classes offered (by % of respondents) 10th survey First survey

Foreign exchange 75.5 92.4

Hedge funds 64.9 80.5

Precious metals 64.5 44.9

Private equity 65.8 66.9

Real estate 65.9 49.2

Structured products 77.1 87.3

Source: Euromoney

“Over the last decade, and particularly since trust was lost over the financial crisis, clients have wanted simpler services

and simpler products”Bruce Weatherill, ComPeer

A EUROMONEY MAGAZINE sponsored statement

A LEADER IN WEALTH MANAGEMENTChina Minsheng Banking Corp has established itself as a true leader in wealth management across the country – and its expert private banking team is now giving its support to a second generation of wealth creators

Zhang Sheng, head of private banking, China Minsheng Banking Corp

China’s wealth is growing quickly. Every day there are more high-net-worth individuals (HNWIs) and greater demand for wealth management services to cater to their increasingly sophisticated needs and requirements.

China Minsheng Banking Corp (CMBC) is acutely aware of this trend. Its private banking division is growing step by step with the country’s wealthy, working tirelessly to fulfil their demands with a keen listening ear and unparalleled levels of expertise.

In the past year, the customer base of CMBC Private Banking has increased by more than 100% and the assets it manages on behalf of HNWIs have grown by more than 87%.

There is no accident in the ability of CMBC Private Banking to continue attract the nation’s wealthy in such numbers. The bank’s approach is based upon innovation, efficiency, a finely-tuned competitiveness – and a strong belief in listening to customers.

CMBC Private Banking formulates its investment policies on the basis of extensive, scientific market research so that customers can be sure the advice they receive is based upon the very best and most up-to-date insights. The relationship between bank and customer goes much deeper than the provision of basic financial products and services, however. It is typified in every case by in-depth communication and a profound understanding of the individual customer’s needs.

It is this holistic approach – offering each customer a unique

tailor-made suite of services – that has kept CMBC Private Banking ahead of the competition and established it as one of the leaders in private banking in China and Asia as a whole.

Family mattersToday, more than ever, questions of succession are on the minds of China’s HNWIs, as the first generation of modern entrepreneurs prepares to hand over the reins of power to their sons and daughters.Transition planning is the new catchphrase for the country’s wealthy – and CMBC Private Banking is deploying its wisdom, creativity and ingenuity to find the solutions that best match the families facing up to this critical process.

A dedicated new division has been set up by CMBC Private Banking to explore this new market, to focus on HNWIs and their family affairs, innovatively addressing their issues and being a leader in this important emerging element of wealth management.

Putting customers firstCustomers have always been the first and most important focus of CMBC Private Banking’s mission. The bank’s development and evolution have been driven by the demands and requirements of customers.

Today, the bank has specialized units for private banking customers at 33 of its branches, concentrating on the specific needs of HNWI customers with investible assets of RMB8 million or more.

Dedicated teams focus on providing tailor-made wealth management services for customers and their family members, offering a comprehensive suite of services including investment management, financial management and strategic consultancy to cater for all aspects of their financial futures.

A reputation for excellenceThe success of CMBC Private Banking, and its ability to continue to draw record numbers of HNWI

customers, is based upon the most solid of foundations: its reputation for excellence.

CMBC Private Banking has steadily built up an enviable level of expertise, drawing on superior resources and a nationwide network to provide the highest levels of service and products on the market. It has built powerful alliances with leading domestic institutions to offer its customers the very best options to safeguard their wealth and inheritance.

Internationally, it maintains a firm foothold in global asset allocation by fully using overseas resources – allowing for cooperation with global financial organizations on products, information, labour, investment and training.

It has been a tireless journey for CMBC Private Banking so far – constantly seeking out the very best that is available on the market domestically and internationally for customers in order to maintain its position as the leader in wealth management.

But as any entrepreneur will tell you, there can never be any compromise on excellence. CMBC Private Banking is committed to being the number one private bank and the first resource for HNWIs across China as its astonishing ascendancy continues.

Now more than ever – as China’s first generation of entrepreneurs prepares to hand over to a new generation of wealth creators – CMBC Private Banking is determined to be a faithful and dependable partner to them, every step of the way.

Supported by strong economic growth, China’s domestic private banking sector has been developing rapidly. But could a lack of education and mounting competition from overseas stall its progress?

Chinese private banking grows up

By: Kanika Saigal

Private banking


China’s economic boom of

the 1970s spurred by Deng

Xiaoping’s economic reforms

turned entrepreneurs into

millionaires. And although

China’s economy has slowed recently, in rela-

tive terms it is holding up well.

On the back of its economic growth, China

has become the second-largest wealth man-

agement market in Asia Paci�c. According to

research by Boston Consulting Group in con-

junction with China Construction Bank, the

number of Chinese high-net-worth individu-

als (HNWIs – those with at least $1 million

in investable assets) doubled from 510,000 in

2008 to 1,030,000 by the end of 2010.

China’s �nancial institutions and banks are

rapidly adapting to the needs of this growing

number of HNWIs. The strength of China’s

private banks has been marked by impres-

sive gains in the league tables. According to

Euromoney’s private banking survey, China

Merchant Bank rose from 26th place to 19th

globally last year, breaking into the top 20

best private banks for the �rst time. Bank of

China rose to 21st place globally, up from

27th place the previous year.

For all its recent progress, the Chinese

private banking sector is still relatively young,

and its development so far suggests that when

it matures it will look different to its western

equivalent.

“Private banking in China in its current

form is more akin to red-carpet retail banking

than private banking as you might know it,”

says Jason Bedford, senior manager, �nancial

services, at KPMG in China.

The closest thing to more traditional

private banking in China is the business

model of trust companies on the mainland,

says Bedford “They have dedicated client

relationship managers for HNWIs; they host

events; and their product development capa-

bility ranges from capital growth products

through to capital preservation products and

vanity products – such as funds investing in

�ne wine or tea.” However, they do not have

an open infrastructure: “[trust companies in

China] sell only their own products and not

other companies’ products.”

Alfred Shang, partner at Bain & Company,

says: “Since 2007, when the private bank-

ing industry really took off, we have seen

competition intensifying as more �nancial

institutions rush to capture market share.

Commercial banks are rolling out their own

private banking services. Other groups of �-

nancial institutions, such as securities houses,

third-party wealth management institu-

tions, trusts and funds, have also developed

dedicated wealth management services for

high-end customers.” But despite the range of

providers “most of the products and services

offered in the market today still tend to be

rather homogeneous,” he says.

THE RECENT INFLUX OF BANKS

seeking to grab a piece of the pie has raised

concerns that lax practices and standards

could enter the system, according to Bassam

Salem, Asia Paci�c CEO of Citi Private Bank.

But he adds that the hope is that this will

eventually rectify itself. “Players without a

strong platform encompassing the discipline

of transparency, appropriate sales practices

and control undoubtedly will be eventually

weeded out,” he says.

But at this early stage, understanding the

differences between a private bank and other

types of wealth management has proved

dif�cult for some. According to a report by

McKinsey and Mingsheng Bank, around

45% of HNWIs in China have only a limited

understanding of what private banking is.

According to Salem, outside the large

urban centres there is some misunderstanding

of what a private bank can do for clients. “In

fact many think they already have a private

banking relationship when what they really

have is a high-end retail relationship.”

“Investors �nd it exceedingly dif�cult and

frustrating to manoeuvre through the current

regulatory environment,” adds Kenny Lam,

partner at McKinsey and based in Singapore.

“Unless regulators pull together a compre-

hensive framework for private banking in

China, the business will lose momentum.”

Some argue that the lack of education has

an adverse effect on client-manager relation-

ships. “Chinese investors are not the most so-

phisticated,” says one observer. “Trust compa-

nies and private banks have often complained

that some of their clients have become violent

and aggressive when investments haven’t

performed the way they expected. The fact is

that many HNWIs just do not understand the

risks attached to certain investments.”

Salem and Lam agree that if private bank-

ing is to continue its expansion in China,

improved education and understanding will

be crucial. Some domestic private banks are

starting to pick up on this. China Merchants

Bank, for instance, has invested capital and

resources in brand building, advertising and

organizing upscale events and activities to

draw attention to their brand and to make

sure that HNWIs understand the services on

offer. “As a result, HNWIs have increased

brand awareness of our bank,” says Ma Wei

Hua, CEO of China Merchants Bank. And

according to Ma, their strategy has worked:

“Over half [of HNWIs in China] list Chinese

private banks as their primary wealth man-

agement provider.”

ATTITUDES TOWARDS RISK AND

portfolio management are also evolving. The

heightened market volatility of recent years

has prompted many investors in China to re-

evaluate their investment strategies. From a

culture that used to focus squarely on wealth

generation, Chinese HNWIs are starting to

embrace wealth preservation through diver-

si� cation, according to surveys conducted

by Bain & Company with China Merchants

Bank.

“In our 2007 report, we observed that

customers’ top investment objective was to

maximize their returns,” highlights Shang.

“By the time of our latest report in 2011,

customers had shifted their priorities to

wealth protection and security. They are also

becoming increasingly sophisticated. Most

are picking their providers based on brand

recognition, and are looking for offshore

investment opportunities.”

Edmund Koh, CEO of UBS wealth man-

agement Singapore & APAC hub, highlights

how this is expressed through HNWIs’ buy-

ing patterns: “While traditional asset classes

such as equities, bonds and mutual funds

continue to form the majority of clients’ port-

folios, interest in alternative investments such

as hedge funds, private equity and commodi-

ties is increasing.”

When it comes to onshore investments, do-

mestic private banks have the advantage over

international competitors. “In China, private

banking onshore is limited by regulators,

so domestic and international banks play

by the same rules,” says Lam. But because

Chinese investors have closer ties to domestic

bank branches, they gravitate towards them.

“Building trust with the customers is an

important cultural aspect, and many HNWIs

still choose their providers through friends’ or

family’s referral,” explains Shang. “This gives

local banks an edge over foreign banks.”

This isn’t to say that Chinese private banks

necessarily outperform well-established

international private banks. Indeed, domestic-

based private banks can be at a disadvantage

when it comes to offshore investing. “Often,

there is a divergence in the types of prod-

ucts and services that banks based in China

offer compared with a bank based in Hong

Kong for instance,” says Lam. “For offshore

purposes, Chinese HNWIs are most likely to

bank out of Hong Kong, Singapore or even

the US and Europe.” According to Wealth

X, a provider of intelligence on ultra-high-

net-worth individuals, 64% of Singapore’s

ultra-wealthy community, with at least $30

million in assets, are non-Singaporeans. Of

this number, mainland Chinese HNWIs ac-

count for about 21%.

There are several other factors that can

motivate a customer to go offshore, some

more extreme than others. “There is a decent

chance that those that have amassed large

amounts of wealth have done so in a way

that is not entirely legitimate,” says one

commentator. “For argument’s sake, say an

international private bank and a domestic

private bank or trust company offer the same

products at the same price, the Chinese inves-

tor would most likely choose to go offshore.

The investment is safer and so is their private

information. If the Chinese authorities were

to make a private investigation, the Chinese

company would be obliged to divulge its cli-

ent’s information; the international company,

on the other hand, wouldn’t.”

The case of Bo Xi Lai is a prime exam-

ple. Following the downfall of the former

politburo member, Beijing seized a majority

of Bo’s onshore assets. But of� cial accounts of

his offshore assets are unknown and therefore

beyond the reach of the authorities.

“HNWIs in general tend to have more

than one banking relationship, and this is

true of Chinese clients too,” says Salem.

“They prefer domestic banks when it comes

to plain-vanilla banking at home, mainly

because they have larger branch and ATM

networks. But business owners who are active

in the region or globally quickly realize the

bene� ts of a global foreign bank compared

with a local bank.”

Chinese private banks are not blind to

offshore competition. “Domestic banks are

also expanding their coverage regionally, in

particularly in Hong Kong. This will result in

more intense competition with foreign banks

in the future,” says Shang.

In the case of ICBC, by the end of 2012

its private bank had established 36 locations

across China, along with Hong Kong and Eu-

rope. In the next couple of years, the Chinese

private bank plans to expand into markets

such as the Middle East, Singapore and far-

ther into southeast Asia to keep up with the

growing market and the competition.

Some argue that the importance of com-

petition between domestic and international

banks might be overblown and that there is

enough business to go around. “It is unlikely

that HNWIs will use one private bank for all

their investments,” explains Shang. “Entrepre-

neurs and professional managers account for

approximately 60% and 15% of HNWIs re-

spectively. Given their pro� le and needs, they

usually use one or two providers for their

transactional banking, another one or two

for private banking, and others for their busi-

nesses and offshore assets. It is unlikely that

one bank will ful� l all of these functions.”

Ultra-HNWIs will always maintain several

banking relationships, if for no other reason

than because they want a diversity of choice,

explains Salem. “However, it is our experi-

ence that clients will often have one major or

house bank that completely understands their

� nancial picture, and other smaller banks

for product or service purposes. The key to

becoming a client’s house bank is to offer

the most comprehensive set of products and

services.”

7©Reprinted from Euromoney magazine February 2013 Copyright Euromoney magazine www.euromoney.com

While traditional

asset classes continue

to form the majority

of clients’ portfolios,

interest in alternative

investments such

as hedge funds,

private equity and

commodities is

increasing

Edmund Koh, UBS

A EUROMONEY MAGAZINE sponsored statement

A NEW GENERATION OF WEALTH EMERGESThe China Private Wealth Report 2013 paints a fascinating picture of a country that is growing richer but looking to its next generation like never before. The evolution of private banking in China is analysed by Liu Jianjun, head of retail banking at China Merchants Bank, which produced the report in conjunction with Bain & Company

Liu Jianjun, head of retail banking, China Merchants Bank

What does your report tell us about private banking customers in China in 2013? How are their demands changing, and are they still growing in numbers?Most Chinese high-net-worth individuals (HNWIs) are business owners – mostly first-generation entrepreneurs – and most are aged between 40 and 60. As their businesses become stable and successful and their children approach adulthood, many have begun to consider wealth inheritance. Meanwhile, wealth preservation has replaced wealth creation as their primary wealth management objective.

Following recent market ups and downs, Chinese HNWIs have a more conservative attitude toward investment and an increasingly mature investment philosophy. HNWIs now prefer more moderate investment risks, focusing their allocation on moderate and low-risk investment products, rather than high-risk and high-return products.

As more HNWIs begin to focus on wealth preservation, more investors are seeking to manage market risks by diversifying their investments and pursuing moderate returns, and they are showing more interest in diversifying the allocation of their assets through overseas investments.

We predict that China’s private wealth market will maintain its growth momentum in 2013, and individual investable assets may reach RMB92 trillion, a 14% annual increase. The population of HNWIs will continue to grow

in 2013, reaching about 840,000, representing an estimated 20% annual increase from the previous year. Total wealth owned by HNWIs could reach RMB27 trillion, a 22% compound annual increase.

Is the trend towards a more cautious approach to investment a temporary one or a long-term movement in your opinion?Many HNWIs have established their businesses and are now focused on ensuring future living standards for themselves and their families. To that end, the preservation and stable increase of wealth has become increasingly important. They have some concerns regarding policy trends, market risks and business operational risks, and ultra-HNWIs are more focused on what they perceive as the unpredictability of marriage, family and personal health risks.

As the needs of HNWIs changed, HNWIs in our survey

showed high interest in family trusts and overseas asset allocation in addition to the traditional and more stable investments, such as cash, deposits and bonds. These kinds of services will be increasingly favoured by HNWIs.

What in your view are the biggest challenges for the private banking market in China in the years ahead and how can these challenges be overcome? Over the past few years, HNWIs have developed a stronger awareness of the need to manage their wealth, which has fostered a higher reliance on private banking services. China’s private banks have become the primary choice in the domestic market due to their advantages in brand, service and product. Since private banks are preferred by Chinese HNWIs, the competitive situation requires us to offer tailored and differentiated products and services to targeted customer segments. This requires in-depth study on the overall wealth management demands of each customer segment.

Chinese private banks should segment customer groups using multiple dimensions, such as occupation, asset size and overseas investment needs, giving them a precise and comprehensive understanding of customer needs.

Besides meeting each segment’s needs, the core of private bank services should transfer from product portfolio allocation to overall wealth management planning and comprehensive financial

services. Private banks can respond to these changes and build a long-term partnership with customers by earning their trust.

The domestic private banking industry is in a critical period of development, and the key to improving competitiveness is to build a high-quality service team and a diversified product and service platform quickly and effectively. Private banks may need to invest in human capital to ensure they have the talent and extensive expertise to meet customer service objectives. They also should consider the need to take advantage of their own networks and resources to expand products and services in accordance with the regulatory framework. Your bank has been researching and producing the China Private Wealth Report since 2009. Over the years, what has it shown you about the industry’s development and direction?China’s private wealth market has transformed from a time of opportunity in the early days to a period of fiercer competition in 2011, and now it is in a new phase of building a solid foundation.

China’s private banking industry has entered a critical stage of development. The key to future success in China’s private wealth market is to build a strong brand image, to provide a comprehensive service platform and to adopt greater professionalism. Ultimately, the goal of private banks should be to build deeper, stronger and long-lasting relationships with customers.

© Reprinted from Euromoney magazine February 2013 Copyright Euromoney magazine www.euromoney.com

10th Private banking survey – global results

10

Best private banking services overall2013 2012 % of total category score

1 2 UBS 7.88

2 1 Credit Suisse 6.86

3 4 JPMorgan 5.35

4 3 HSBC 5.09

5 5 Citi 4.92

6 6 Deutsche Bank 3.11

7 9 Merrill Lynch

Wealth Management 2.61

8 8 Santander 2.44

9 7 BNP Paribas 2.16

10 11 Goldman Sachs 1.86

11 13 Julius Baer 1.86

12 10 Barclays 1.82

13 15 Société Générale 1.54

14 14 ABN Amro 1.54

15 17 Morgan Stanley 1.50

16 23 Nordea 1.24

17 20 RBC 1.24

18 12 Pictet 1.22

19 26 China Merchants Bank 1.11

20 16 Banco Itau 0.97

21 27 Bank of China 0.91

22 29 SEB 0.87

23 33 BTG Pactual 0.84

24 22 Standard Chartered 0.84

25 38 Kotak Mahindra 0.84

26 21 Coutts 0.81

27 32 Danske Bank 0.79

28 35 Bank of Communications 0.74

29 25 ICBC 0.74

30 18 Rothschild 0.74

31 30 Lombard Odier Darier Hentsch 0.72

32 24 BBVA 0.70

33 52 China

Construction Bank 0.61

34 28 UniCredit 0.59

35 40 Wells Fargo 0.56

36 79 China Minsheng Bank 0.55

37 34 Scotiabank 0.53

38 36 Northern Trust 0.52

39 48 Shinhan 0.52

40 39 Commerzbank 0.52

41 45 Swedbank 0.51

42 41 HDFC 0.50

43 19 Credit Agricole Private Banking 0.47

44 Mitsubishi UFJ Merrill Lynch

PB Securities 0.46

45 43 ING 0.46

46 58 IIFL Private Wealth Management 0.43

47 37 Berenberg Bank 0.43

48 47 Hana Bank 0.42

49 57 Bradesco 0.42

50 54 DNB Bank 0.42

51 Banco do Brasil 0.41

52 46 Svenska Handelsbanken 0.40

53 Agricultural Bank of China 0.39

54 64 China CITIC Bank 0.39

55 59 Intesa Sanpaolo 0.38

56 SMBC 0.36

57 51 Raiffeisen Bank International 0.36

58 85 Sal Oppenheim 0.35

59 60 ANZ 0.33

60 86 Bank of Singapore (OCBC) 0.31

61 55 Metzler 0.30

62 Chinatrust Commercial Bank 0.30

63 Nomura 0.29

64 44 Credit Mutuel 0.29

65 65 Lazard 0.29

66 66 Sarasin 0.29

67 67 Bessemer 0.27

68 50 Rabobank 0.26

69 70 Carnegie 0.26

70 31 EFG 0.26

71 Kookmin Bank 0.26

72 82 ICICI Bank 0.25

73 Edmond de Rothschild Group 0.24

74 87 CIMB 0.22

75 Mizuho 0.22

76 Bankhaus Lampe 0.22

77 77 KBC 0.22

78 88 LGT 0.22

79 93 Woori Bank 0.22

80 Formuesforvaltning 0.22

81 Casa de Bolsa Banorte-Ixe 0.21

82 69 Erste Bank 0.21

83 72 CIBC 0.21

84 National Australia Bank 0.20

85 Safra 0.20

86 Westpac 0.20

87 Alfa Bank 0.19

88 78 C. Hoare & Co. 0.19

89 42 DBS Bank 0.19

90 68 UBP 0.18

91 BDO Private Bank 0.18

92 76 Van Lanschot 0.17

93 89 Vontobel 0.16

94 62 National Commercial Bank 0.15

95 Alandsbanken 0.15

96 OP-Pohjola Group 0.15

97 Akbank 0.15

98 Maybank 0.15

99 90 Commonwealth Bank 0.14

100 98= Banca March 0.14

©Reprinted from Euromoney magazine February 2013 Copyright Euromoney magazine www.euromoney.com 11

10th Private banking survey – regional results

BY REGIONAsiaBest private banking services overall2013 2012 % of total category score

1 2 UBS 6.65%

2 3 Citi 5.86%

3 1 HSBC 5.85%

4 4 Credit Suisse 4.71%

5 7 China Merchants Bank 3.88%

6 9 Bank of China 3.18%

7 10 Merrill Lynch

Wealth Management 2.99%

8 14 Kotak Mahindra 2.93%

9 13 Bank of Communications 2.61%

10 6 ICBC 2.60%

11 8 Standard Chartered 2.49%

12 5 Deutsche Bank 2.40%

13 11 JPMorgan 2.18%

14 22 China Construction Bank 2.15%

15 30 China Minsheng Bank 1.92%

16 20 Shinhan 1.82%

17 15 Barclays 1.78%

18 16 HDFC 1.76%

19 66 Mitsubishi UFJ Merrill Lynch

PB Securities 1.63%

20 25 IIFL Private

Wealth Management 1.52%

21 19 Hana Bank 1.48%

22 12 BNP Paribas 1.44%

23 49 Agricultural Bank of China 1.37%

24 27 China CITIC Bank 1.34%

25 48 SMBC 1.26%

26 28 ANZ 1.11%

27 32 Société Générale 1.08%

28 38 Chinatrust Commercial Bank 1.04%

29 33= Bank of Singapore (OCBC) 1.03%

30 46 Nomura 1.00%

31 18 Goldman Sachs 0.92%

32 40 Kookmin Bank 0.90%

33 31 ICICI Bank 0.87%

34 33= CIMB 0.79%

35 95= Mizuho 0.77%

36 21 Morgan Stanley 0.76%

37 23 ABN Amro 0.76%

38 36 Woori Bank 0.76%

39 41 Westpac 0.69%

40 44 National Australia Bank 0.68%

41 26 Julius Baer 0.66%

42 17 DBS Bank 0.65%

43 29 Coutts 0.62%

44 70 BDO Private Bank 0.61%

45 59 Maybank 0.52%

46 45 ING 0.49%

47 81 Taishin Financial 0.47%

48 35 Commonwealth Bank 0.47%

49 63 Bank Mandiri 0.43%

50 51 MUFG 0.43%

Relationship management2013 2012

1 3 Citi

2 2 UBS

3 1 HSBC

4 5 China Merchants Bank

5 7 Bank of China

6 4 Credit Suisse

7 20 China Construction Bank

8 6 Merrill Lynch Wealth Management

9 13 Bank of Communications

10 9 ICBC

11 8 Standard Chartered

12 29= China Minsheng Bank

13 11 JPMorgan

14 12 Deutsche Bank

15 29= ANZ

Privacy and security2013 2012

1 1 Credit Suisse

2 3 UBS

3 4 Citi

4 2 HSBC

5 6 Bank of China


7 5 Deutsche Bank



10= 15 ICBC

10= 10 Merrill Lynch Wealth Management

12 23 Shinhan

13 9 JPMorgan


15 17 ANZ

16 7 BNP Paribas

17 16 HDFC


PB Securities

19 34 Kotak Mahindra

20 12 Julius Baer


22 38 Société Générale

23 41 China CITIC Bank

24 25 Hana Bank

25 46 Agricultural Bank of China

Range of investment products2013 2012

1 1 UBS

2 2 Citi

3 3 HSBC


5 4 Credit Suisse

6 10 Kotak Mahindra

7 8 Bank of China

8 19 IIFL Private Wealth Management

9 5 Deutsche Bank


11 6 ICBC

12 13 Barclays

13= 12 Standard Chartered

13= 24 Shinhan


16 9 JPMorgan

17 66= Mitsubishi UFJ Merrill Lynch

PB Securities

18 25 HDFC

19 29 China Minsheng Bank



22 17 BNP Paribas

23 37 CIMB

24 22 Hana Bank

25 26 ICICI Bank

Range of advisory services2013 2012

1 1 HSBC

2 2 UBS

3 3 Credit Suisse

4 4 Citi

5 9 Bank of China

6 5 Kotak Mahindra



9 6 Deutsche Bank

10 62 Mizuho

11= 13 Bank of Communications

11= 23 China Minsheng Bank


14 26 SMBC

15 10 ICBC


17 58 Bank of Singapore (OCBC)


PB Securities

19 8 JPMorgan


21 11 Barclays


23 20 Shinhan

24 19 Hana Bank

25 18 BNP Paribas

Bespoke wealth planning2013 2012

1 2 UBS

2 4 Credit Suisse

3 3 Citi

4 1 HSBC

©Reprinted from Euromoney magazine February 2013 Copyright Euromoney magazine www.euromoney.com


12

5 13 Kotak Mahindra


7 47= SMBC


9 8 Bank of China


11 22= China Construction Bank

12 10 ICBC

13 17= Bank of Communications


15 11 Barclays



18 16 Shinhan

19 52= Mizuho

20 6 Deutsche Bank

21 12 BNP Paribas



24 5 JPMorgan

25 28= ABN Amro

Net-worth-specific servicesSuper affluent ($500,000 to $1mln)2013 2012

1 2 Citi

2 1 HSBC

3 6 Bank of China



6 4 HDFC


8 15 UBS


10 7 ICBC

11 8 ICICI Bank




PB Securities

15 30 Credit Suisse

16 18 Shinhan


18 5 DBS Bank



21 40 Chinatrust Commercial Bank

22 10 ANZ



25 24= Hana Bank

High net worth I ($1mln to $10mln)2013 2012

1 1 HSBC

2 2 Citi

3 3 UBS

4 4 Credit Suisse



7 14 Kotak Mahindra

8 9 ICBC

9 7 Bank of China


11 19= China Construction Bank





PB Securities

16 6 BNP Paribas

17 16 ANZ

18 15 Barclays

19 27 HDFC

20 24 Shinhan

21 13 Deutsche Bank

22 31= ICICI Bank


24 11 DBS Bank

25 41 National Australia Bank

High net worth II ($10mln to $30mln)2013 2012

1 4 Citi

2 2 UBS

3 1 HSBC

4 3 Credit Suisse


6 6 JPMorgan




10 9 Bank of China


12 7 Deutsche Bank

13 10 ICBC

14 11 Barclays

15 42 Nomura

16 40 SMBC

17 12 Goldman Sachs


19 25 Shinhan



22 24 ANZ

23 19 Hana Bank


PB Securities

25 66= Agricultural Bank of China

Ultra high net worth (Greater than $30mln)2013 2012

1 1 UBS

2 2 Credit Suisse

3 5 JPMorgan

4 4 Citi

5 3 Goldman Sachs

6 6 HSBC


8 8 Deutsche Bank



11 9 Bank of China


13 10 ICBC

14 15 Barclays




18 14 Shinhan

19 21 Hana Bank


21 56 Nomura


PB Securities

23 29= IIFL Private Wealth Management


25 11 Morgan Stanley

Equity portfolio management2013 2012

1 2 UBS

2 26 Nomura


4 3 Citi


6 6 Bank of China

7 4 HSBC



10 8 Kotak Mahindra


12 9 Goldman Sachs

13 7 Credit Suisse

14 88= Daiwa Securities

15 5 JPMorgan


17 14 HDFC

18 19 BNP Paribas

19 11 ICBC

20 24= China CITIC Bank

21 20 Shinhan

22 29 ABN Amro

23= 40 Agricultural Bank of China

23= 23 ICICI Bank


Fixed income portfolio management2013 2012

1 3 Citi


2 1 UBS

3 2 HSBC

4 5 Deutsche Bank

5 31 Nomura

6 4 JPMorgan

7 7 Credit Suisse


9= 6 Bank of China

9= 14 Kotak Mahindra

11 10 ICBC





16 9 BNP Paribas

17 55= Daiwa Securities

18 50= Mizuho


20 16 Barclays


22 28 Shinhan



24= 18 HDFC

Foreign exchange2013 2012

1 1 Citi

2 2 HSBC

3 3 Deutsche Bank

4 5 Bank of China

5 4 UBS


7 7 Credit Suisse


9 14 ANZ


11 11= Barclays



14 8 ICBC

15 11= KEB

16 13 BNP Paribas

17 31= Westpac

18 42 ICICI Bank

19 20 Shinhan

20 38 HDFC


22 57= MUFG

23 37 Commonwealth Bank


25 9 JPMorgan

Lending/financing solutions2013 2012

1 2 Citi

2 3 Deutsche Bank

3 1 HSBC

4 4 UBS


6 5 ICBC


8 7 Bank of China


10 8 Credit Suisse



13 48= MUFG



16 12 Barclays

17 10 BNP Paribas

18 66= SMBC

19 46= Westpac

20 26 HDFC

21 20= Kotak Mahindra

22 9 DBS Bank

23 97= Mizuho

24 17 ANZ

25= 24 ICICI Bank

25= 20= IIFL Private Wealth Management

Commodities investment2013 2012

1 2 Citi

2 1 Goldman Sachs



5 26 Nomura

6 3 UBS

7 30 Anand Rathi

8 6 Bank of China

9 7 Deutsche Bank


11 4 Morgan Stanley


13 17= Barclays

14 8 ICBC

15 5 HSBC


17 9 Credit Suisse

18 31 Macquarie

19 15= JPMorgan




23 21 ANZ

24 20 Shinhan

25 22 BNP Paribas

Precious metals investment2013 2012

1 2 Citi

2 4 HSBC

3 3 UBS

4 1 Goldman Sachs

5 6 Credit Suisse

6 5 ICBC

7 8 Deutsche Bank

8 7 Bank of China


10 16 Barclays



13 9 JPMorgan

14= 22 China CITIC Bank

14= 27= China Minsheng Bank


17 19 Shinhan


19= 18 Merrill Lynch Wealth Management

19= 31 Nomura


22 23 HDFC

23 32 BNP Paribas

24 42 CIMB


Real estate investment2013 2012

1 1 HSBC


3 3= HDFC

4 2 Citi

5 3= Kotak Mahindra


7 5 ICICI Bank

8 8 Bank of China

9 10 UBS

10 26 Deutsche Bank




14 7 DBS Bank

15 9 JPMorgan

16 32 Barclays

17 16 Credit Suisse

18 23 Hana Bank

19 20 ANZ

20 14= China Merchants Bank

21 21 Shinhan

22 34 BNP Paribas

23 14= ICBC

24 40= Société Générale


Private equity investment2013 2012

1 1 UBS

2 2 Goldman Sachs

3 3 Citi

4 7 Kotak Mahindra



5 34= Nomura

6 6 JPMorgan

7 5 Credit Suisse


9 12 ICICI Bank



PB Securities


13 8 Bank of China

14 10 HSBC



17 13 ICBC

18 27 Barclays



21 15 Deutsche Bank

22 80= SMBC



25 21 Hana Bank

Structured products2013 2012

1 1 Citi

2 2 Deutsche Bank

3 3 UBS

4 5 Credit Suisse

5 6 Barclays


7 4 HSBC

8 16 Bank of China

9 9 ICBC

10 15 Goldman Sachs



13 32 Nomura


15 24 ABN Amro


17 12 JPMorgan





PB Securities


23 13 BNP Paribas

24 23 Shinhan


Managed futures2013 2012

1 1 Citi

2 2 Goldman Sachs

3 3 UBS

4 23 Nomura

5 4 JPMorgan

6 10 Bank of China



9 6 Morgan Stanley

10 11 Deutsche Bank

11 9 Credit Suisse

12 8 HSBC


14 18 ANZ

15 20= China Merchants Bank

16 34= Kotak Mahindra

17 28 Barclays

18 26 Mitsubishi UFJ

Merrill Lynch PB Securities

19 16 Shinhan

20 47 DBS Bank

21 14 Hana Bank

22 34= IIFL Private Wealth Management

23 45 HDFC



Hedge fund investment2013 2012

1 1 Citi

2 2 UBS

3 6 Credit Suisse

4 4 JPMorgan

5 3 HSBC

6 7 Bank of China

7 5 Goldman Sachs

8 21 Nomura




PB Securities


13 8 Deutsche Bank


15 9 ICBC



18 41 Daiwa Securities

19 17= Hana Bank

20 20 ANZ


22 17= Shinhan



25 33= ABN Amro

Luxury investment (non-art)2013 2012

1 1 UBS

2 3 Credit Suisse

3 2 Citi

4 7 BNP Paribas

5 6 Bank of China



8 4 HSBC

9 17 Deutsche Bank


11 11 Julius Baer

12 18 Shinhan

13 27 Barclays

14 8= JPMorgan





19 41 Westpac


21 10 Coutts

22 25 Woori Bank

23 8= ICBC



Family office services2013 2012

1 1 UBS

2 4 Kotak Mahindra

3 2 Credit Suisse


5 9 Bank of China


7 3 HSBC

8 5 Citi





13 7 JPMorgan

14 20 Hana Bank

15 61 Myer Family Office

16 15 ANZ

17 10 ICBC

18 37= SMBC

19 17 Barclays

20 14 Julius Baer


22 19 Shinhan

23 52 Lombard Odier Darier Hentsch

24 41= Kookmin Bank


Inheritance and succession planning2013 2012

1 3 UBS

2 1 HSBC

3 2 Credit Suisse

4 10 Bank of China

5 4 Citi



7 46 SMBC


9 6 Barclays


11 11 IL&FS


13 7 JPMorgan

14 41 Mizuho



PB Securities


18 20 Hana Bank

19 14 ICBC

20 52= Nomura



23 22 ABN Amro

24= 8 IIFL Private Wealth Management

24= 31 MUFG

Trust services2013 2012

1 2 UBS

2 4 Citi

3 3 Credit Suisse

4 1 HSBC

5 5 IL&FS

6 7 ICBC

7 12 Bank of China


9 8 JPMorgan





14 43= Mizuho

15= 6 Barclays

15= 53= Agricultural Bank of China

17 34 SMBC

18 36= MUFG

19 20= Hana Bank

20 19 Shinhan



22= Chuo Mitsui

24 20= China CITIC Bank

25= 13 China Construction Bank

25= 28 Woori Bank

Tax guidance and services2013 2012

1 2 UBS

2 1 HSBC

3 3 Credit Suisse

4 8 Bank of China

5 10 Ernst & Young

6 9 PricewaterhouseCoopers

7 5 KPMG


9 7 ICBC




13 52 Mizuho

14 4 Citi

15 34 Barclays

16 17 Hana Bank



19 38 Nomura

20= 30 Agricultural Bank of China


22 19 ANZ

23 41 SMBC

24 53 Westpac

25 11 JPMorgan

Offshore services2013 2012

1 1 HSBC

2 2 UBS

3 3 Citi

4 5 Bank of China

5 4 Credit Suisse



8 8 Barclays


10 6 Deutsche Bank

11 11 JPMorgan

12 10 ICBC

13 31 Julius Baer

14 12 BNP Paribas

15 9 KEB




19 50 Nomura

20 21 Shinhan

21 46 Lombard Odier Darier Hentsch



24 20 Coutts

25 Bank of East Asia

Corporate advisory for private banking clients2013 2012

1 1 Citi

2 4 HSBC

3 2 Credit Suisse

4 8 ICBC

5 3 UBS

6 9 Bank of China

7= 11 Deutsche Bank

7= 62= SMBC

9 7 Goldman Sachs



12 29 Nomura


14 6 JPMorgan


16 16 Barclays



19 54 Mizuho

20 Chinatrust Commercial Bank


22= 18 IIFL Private Wealth Management

22= 62= MUFG

24 20 Hana Bank


Islamic banking services2013 2012


2 1 HSBC

3 4 CIMB

4 7 Bank of China

5 3 Maybank


6= 10 China Construction Bank

6= 14 China Merchants Bank

9 6 UBS

10 8 Arab Bank


12 26 Credit Suisse

13 27 Bank Mandiri

14 5 ICBC

15 60 BNP Paribas


17 Alliance Bank


19 2 Citi

20 13 Abu Dhabi Commercial Bank

Philanthropy services2013 2012

1 1 UBS

2 2 Credit Suisse

3 3 HSBC

4 6 Bank of China

5 4 Citi


7 5 JPMorgan

8 18= Deutsche Bank


10 30 Barclays





13 15 ANZ



16 35= Standard Chartered

17 25= Julius Baer

18 20 Shinhan

19 14 ABN Amro


21 32 Commonwealth Bank


23 18= BNP Paribas

24 7 ICBC

25 46 Westpac

Yacht and aircraft fi nancing2013 2012

1 2 UBS

2 4 Bank of China

3 8 Deutsche Bank

4 1 Citi





9 6 ICBC

10 5 Credit Suisse

11 7 JPMorgan



14 34= Coutts

15 10 Barclays

16 13 ANZ



19 3 HSBC

20 9 BNP Paribas

Art, banking and numismatics2013 2012

1 1 UBS

2 6 Bank of China

3 5 Citi

4 3 Credit Suisse


6 2 HSBC

7 19 Coutts

8 13 JPMorgan


10 10 ANZ


12 20 Deutsche Bank

13 12 ABN Amro



16 14= Julius Baer


18 33 Westpac

19 9 BNP Paribas

20 7 ICBC

21 21= Shinhan

22 69= National Australia Bank


24 44 Barclays

25 25 Goldman Sachs

Specialized servicesEntrepreneurs2013 2012

1 2 Citi

2 1 HSBC


4 3 UBS

5 6= Bank of China

6 29 Nomura

7 6= Kotak Mahindra

8 4 Credit Suisse





13 10 Deutsche Bank



16 9 ICBC

17 19 Barclays


19 52 SMBC

20 15 JPMorgan


22 84= Bank Central Asia

23 26= Hana Bank


PB Securities

25 Daiwa Securities

Corporate executives2013 2012

1 1 Citi

2 2 HSBC

3 6 HDFC

ChinaBest private banking services overall2013 2012


2 3 Bank of China


4 1 ICBC

5 7 UBS

Relationship management2013 2012


Privacy and security2013 2012

1 1 Bank of China

Range of investment products2013 2012


Net-worth-specifi c servicesSuper affl uent2013 2012

1= 2 Bank of China

1= 4 Bank of Communications

High net worth I2013 2012


High net worth II2013 2012



Ultra high net worth2013 2012

1 3 UBS

Lending/fi nancing solutions2013 2012

1 1 ICBC

Commodities investment2013 2012


Family offi ce services2013 2012

1= 2 Bank of China

1= 4 UBS


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Western Europe North America Asia Latin America

$ B

ln

Assets Under Management by regions 2009-2012

2009

2010

2011

2012

Total client (non-institutional) AUM by region 2009-2012

Assets Under Management - Asia 2009-2012

$821.81 $957.23

$1,542.27 $1,707.12

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

16%

61%

11%

2009 2010 2011 2012

$ B

ln

Total client (non-institutional) AUM - Asia 2009-2012

786.06

508.82

324.82

103.36 68.53

0

100

200

300

400

500

600

700

800

900

China Hong Kong Brazil Korea Taiwan

$ B

ln

Total Client (non-institutional) AUM - Selected countries

Total client (non-institutional) AUM - Selected countries

10th Private banking survey – data


-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Central & Eastern Europe

Latin America Asia Africa North America

Nordic & Baltics

Western Europe

Middle East

Caribbean

%

Annual AUM Growth Rate by Region 2012

Annual AUM growth rate by region 2012

23.7

20.8 18.9

14.0

0

5

10

15

20

25

Brazil India China United Arab Emirates

%

Annual % AUM Growth Rate 2011-2012 - Brazil/ India/China/UAE

Annual % AUM growth rate 2011-2012 - Brazil/India/China/UAE

7432

3270 1589 368

0

2,000

4,000

6,000

8,000

China Brazil India Russia

No. of Private Banking Employees - BRIC

No. of private banking employees - Bric

PB Survey and Charts FINAL FINAL.indd 84 04/07/2013 16:13


5702.27

1678.10 617.00

273.00

0

2,000

4,000

6,000

China Korea Hong Kong Taiwan

$ M

ln

Net Income of Private Banks in China/Korea/HK/Taiwan

Net income of private banks in China/Korea/HK/Taiwan

65.0

35.2 30.3

10.0

-8.3

-20

0

20

40

60

80

India Brazil China Turkey Russia

%

% Change in Net Income 2011-2012 - India/Brazil/

China/Turkey/Russia

% change in net income 2011-2012 - India/Brazil/China/Turkey/Russia

207.5

57.7 15.0 8.8 2.9

-28.0 -41.0

-100

-50

0

50

100

150

200

250

China Japan Malaysia Korea Taiwan Singapore

Hong Kong

%

% Growth in PB Net Income 2011-2012 - Asia

% growth in PB net income 2011-2012 - Asia

10th Private banking survey – data


20.5

16.1 15.5

8.7

0

5

10

15

20

25

China India Brazil Russia

%

% Growth in absolute number of PB clients y-o-y 2011-2012 - BRIC

% growth in absolute number of PB clients y-o-y 2011-2012 - Bric

41.8%

38.7%

21.0%

0

5

10

15

20

25

30

35

40

45

2010 2011 2012

%

% Growth in Gross Revenue - Asia 2010 - 2012

% Growth in gross revenue - Asia 2010 - 2012

60.2 56.8

17.6 15.5

6.9 4.6

2.2

0

10

20

30

40

50

60

70

China Japan Malaysia Taiwan Korea Singapore Hong Kong

%

% Growth in Gross Revenue 2011-2012 - Asia

% growth in gross revenue 2011-2012 - Asia

PB Survey and Charts FINAL FINAL.indd 86 04/07/2013 16:13

C

M

Y

CM

MY

CY

CMY

K

建行A4广告.pdf 2013.7.4 12:20:39 PM

It is the world’s fastest-growing millionaires’ club. While the rest of the world stumbles, China strides ahead; the number of high-net-worth individuals (HNWIs) with at least RMB10 million in investable assets has more than doubled in the past five years.

Today, China is home to more than 700,000 HNWIs – 40,000 of whom are ultra-HNWIs with more than RMB100 million, according to the China Private Wealth Report 2013 by China Merchants Bank and global business consultancy Bain & Company.

Wealth isn’t just growing – it’s spreading too, the report found. There are now 20 provinces in China with HNWI populations exceeding 10,000, five more than in 2010, with Inner Mongolia and Chongqing among the latest to count their HNWIs in five figures.

The rate of wealth expansion across China is staggering. In a recent interview, Nick Yim, head of private wealth management in China for Goldman Sachs, declared the present era “a golden period” for private banking in China.

Keeping pace?But are China’s private bankers ready and able to capitalize on this apparent golden age? In a young and undeveloped market with a shortage of talent, can they keep pace with the increasingly sophisticated expectations of their HNWI customers?

A separate study by China

Minsheng Banking Corporation and McKinsey and Company found four in 10 clients were less than happy with the service they received and would invest much more with private banks if they could find one they liked and trusted enough.

China, it appears, doesn’t yet have a wealth management industry to match the amount of wealth it needs to manage – and the foremost challenge to private banks in the years ahead is likely to be bridging the gap between expectation and delivery.

In fairness, the industry is a victim of its own success. A microcosm of the speed of

development of China’s economy as a whole, the private banking industry has been required to develop and mature in years when the same process took decades in countries overseas.

The first private banks only appeared in 2008 – and one of the most striking features of the Bain report is the way in which the investment priorities of HNWIs have evolved and changed since then. Wealth creation, the number one wealth management objective in the inaugural 2009 survey, dropped to fourth place in the 2013 report, behind quality of life, children’s education and – at the top of the list – wealth preservation, cited by 30% of respondents.

The shift in priorities in part appears to reflect a growing cautiousness in response to the global financial problems and the recent economic slowdown in China. However, it also reflects a particular stage of life for many of the country’s first generation of entrepreneurs.

“Many HNWIs have established their businesses and are now focused on ensuring the future living standards for themselves and their family,” the report notes. “To that end, preservation and stable increase of wealth has become increasingly important.”

Sameer Chishty, global head of wealth management and private banking practice for Bain, said the economic slowdown and market volatility had played a part in changing the investment

preferences of HNWIs in China. “They are relatively new investors,” he said. “Chinese wealth is new and investment exposure is new so they are seeing that what goes up often comes down.

“Another factor is succession planning. This is one of the youngest generations of wealthy people in history, certainly in terms of the amount of wealth they have accumulated at a relatively young age. They are beginning to think about succession and their families.”

Looking after the familyInterestingly, at a time when China’s new president is clamping down on corruption and lavish lifestyles among public figures, the change in attitude in some cases has been prompted by a desire to “clean up” personal lives, he argued.

“Many of them have complicated personal lives with different children from different marriages, and there have been some very high-profile family disputes,” he said. “That has driven them to ask themselves: ‘What would happen if I moved on, or if I died, and I didn’t provide some clarity to my successors?’”

The report found that a third of HNWIs and a half of ultra-HNWIs are now considering or conducting wealth inheritance planning. More than half of ultra-HNWIs have expressed an interest in establishing family trusts, while 15% have done so or started to do so.

WEALTHIER, WISER CLIENTS TEST China’s banksThe number of high-net-worth individuals in China has more than doubled since 2008 – but can the country’s private banks keep pace with their increasingly sophisticated demands and expectations?

By Simon Parry

“China, it appears, doesn’t yet have a wealth management industry to match the amount of wealth it needs to manage”

This shift towards a more mature and prudent investment philosophy has seen the percentage of HNWIs pursuing moderate and low-risk investment strategies going from fewer than 80% in 2009 to more than 90% in 2013.

China’s rich are a homogenous lot, according to the China Minsheng/McKinsey study. They are mostly men aged between 40 and 60 and mostly entrepreneurs or corporate executives. Reflecting the wave of entrepreneurism that swept China as it embraced Deng Xiaoping’s economic liberalization, entrepreneurs made up 40% of the HNWIs interviewed and also comprised the biggest percentage of individuals with assets of over RMB30 million.

Their common profile may justify the view of the ‘golden period’ for private banks in China – but their opinions also suggest strongly that the business isn’t going to fall into the laps of private banks: They are going to have to work hard for it.

Nearly 40% of respondents said they were not satisfied or indifferent to the level of private banking service they received, and nearly 50% said they allocated 20% or less of their investible assets to their primary bank.

More than half of respondents in the McKinsey survey said they would up their allocation to 40% or more of their investible assets

if the bank “could fully satisfy their personal financial needs”, the report found.

More surprising is the widespread lack of awareness of private banks among HNWIs in China. Forty five per cent of respondents said they had only a “basic understanding or less” or private banking services.

Those who had used private banks were underwhelmed. “Some interviewees are not even aware that banks offer a service beyond VIP banking,” the report noted. “Some interviewees claim that since becoming a private banking customer, the service experience is not significantly different from retail [banking].”

Not just about productsOne of the problems is that private banks in China have so far been too product-oriented, Bain’s Chishty argued. “It’s been about coming up with the coolest product that promises you the highest returns and that’s not what HNWIs want,” he said.

“They are looking for more transparency with products. In the future, successful private banks will not just be about more and more products. Successful private banks will be offering value added services – advice and guidance type services.”

What HNWIs want is a relationship manager (RM) or adviser who can tell them what

overseas school to send children to, and what hospital to send a sick relative to in Thailand, Singapore or the US, he suggested.

Private banks were also “missing a trick” by concentrating too much on establishing overseas office for wealthier clients. “Most of the Chinese wealth is within China and will remain in China,” Chishty said. “It needs to be serviced in China by an RM who can actually give them advice and guidance. This is the challenge for the banks.”

One of the biggest players in the market is ICBC Private Banking, which since 2008 has offered a service to clients with investible assets of RMB8 million upwards and now has 36 centres in China as well as bases in Hong Kong, Europe and Singapore.

Acknowledging the rapid pace of change in the market, a spokesperson said: “When private banking was first introduced into China, most of our customers had little knowledge about how private banking services can help them in managing their wealth. Since the global financial crisis in 2008, private banking customers are more willing to accept steady and moderate products with controlled risks. Our key initiative last year was to develop pooled investment portfolios under different investment strategies as vehicles for client with similar preference to maximize their demands for liquidity, security and profitability.”

Foreign banks, it seems, are at a distinct disadvantage. Most HNWIs are businessmen and entrepreneurs with career-long financial relationships with Chinese banks.

With around 50% of Chinese wealth still not professionally managed, however, it is a hard challenge to ignore. Earlier this year, the prestigious British private bank Coutts announced it was doubling its Asian staff to try

to reach into the Chinese market.Michael Blake, general manager

of Coutts Asia, described the gap in the market as a “massive opportunity”. However, Chishty predicted: “Most of the opportunity for foreign banks will remain offshore.”

For every private bank in China, the incentives to get their services right are obvious and vast. The McKinsey report predicts that by 2015, China will be home to 2 million HNWIs and 130,000 ultra-HNWIs – all with money to invest and inheritances to safeguard.

It is a market awash with extravagant levels of capital and potential. The golden age of private banking in China may be some way off yet in terms of service standards – but the prizes for the banks that find a way to meet clients’ demands could be glittering indeed.

Sameer Chishty,Bain

“This is one of the youngest generations of wealthy people in history, certainly in terms of the amount of wealth they have accumulated at a relatively young age. They are beginning to think about succession and their families”

DBS-205-T13 [email protected] 1 1/7/13 10:33 AM

asia pb contents - euromoney private... · 2013-07-18 · art banking and numismatics 30.1 29.7...

Documents