Conference to question private banking’s squeezed middle

Echoing their colleagues in investment banking, private bankers in emerging areas of Europe see the middle segment of their market being squeezed, with only the biggest and the boutiques surviving. As such, some are considering new strategies

 

At EBCG’s Private Banking in CEE, SEE & CIS conference in Prague in June, the compere tried to rally the troops against a tightened regulation that would act as a preventative measure to the furthering of business. Despite the odd exception, most delegates and speakers appear ready to respond positively to the challenges facing the industry.

Stephen Jennings, owner of Russian investment bank Renaissance Capital, remarked in June that his business will increasingly resemble a barbell over the coming years, with the mid-sized players falling by the wayside.

Leaders in private banking in the region foresee a similar fate. Michael Wodzicki, head of private banking at Kathrein Privatbank, maintained that €10bn in assets under management per banking license was needed to adequately persist through the coming years.

Smaller Western European outfits are targeting Central and Eastern European (CEE) economies to help them survive that coming retrenchment, albeit using widely differing tactics.

Schoellerbank is considered by some, including CEE head Stephen Maxonus, as an overly conservative and outmoded bank equipped only to harbour generations of old money in Austria. However, just over a decade after being bought out by UniCredit Group, in 2011 it was designated to act as the Italian group’s hub for international private banking, attracting clients from CEE and looking to claim market share from the Swiss banks currently dominating the sector. It is now rolling out a fresh strategy to find new business by leveraging the largest banking network in the region to fish for established private banking clients.

Due to the relatively limited distribution of wealth in the CEE region, clients there tend to have an overall asset base larger than that in Austria and Germany, while privacy and political risk are compelling reasons to look for an asset manager in Western Europe – Hungary being a prime example of the latter.

Austrian banks situated on the border experienced a significant rise in clients travelling cross border to deposit assets. That makes Hungary one of Schoellerbank’s top targets in the region, alongside Russia, Kazakhstan, the Czech Republic, Bulgaria and Romania, though going further southeast into the Balkans is difficult because of a small potential client base.

That final point is one that Hypo-Alpe-Adria, the struggling Austrian outfit that was nationalised in 2009, has made central to its own low-cost strategy in the region. The company is without the resources to establish a full private banking strategy.

Instead, the bank is leveraging an established network in Southeast Europe to attract relatively high-end clients in countries such as Slovenia, Croatia and Serbia, signing them up for enhanced retail banking services, and hoping they grow into affluent clients as regional incomes swell.

Therefore, faced with a young potential clientele – 80 percent of which are under 40 – who need to have €5,000 on deposit (20 percent of all clients), Hypo-Alpe hopes to steadily establish its own batch of Balkan private banking clients, offering products such as gold cards along the way. Implementing such a plan should stabilise the business when dealing with clients wary of investment markets – as is the case at present.

How has the situation changed in the private banking sector since June 2012? EBCG is holding the 2nd Annual Private banking conference in June, once again in Prague. A range of professionals, including private bankers, insurance companies, broker companies, the companies on management of funds, financial advisers, experts in precious metals and producers of luxury goods of famous brands will gather again to discuss actual tendencies and problems which experts of private banking face nowadays. Join them, meet and network with your industry peers.

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