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2017 was a good year; what's next?

Private banks enjoyed a record year in 2017 with many posting double-digit growth in AUMs, income and profit

"In 2017, we continued to see strong growth in net new money inflows from clients referred to HSBC Private Banking through internal collaboration with our global businesses," says Mr Kuntz.

"Citi Private Bank had one of its best years ever in 2017 with record growth across all product lines and geography. . . Revenue growth yoy was 24% and net income yoy was 48%," says Mr Lo.

"Business-wise, Indosuez wealth management saw a double-digit growth in revenue and registered strong solid client performance, bolstered by supportive financial markets," says Mr Masclet.

LAST year was a banner year for private banks as markets boomed, reinforcing Asia's pivotal role in boosting the fortunes of the industry.

The Business Times held a discussion with the main players in the sector to get a picture of their business and outlook for 2018.

Roundtable participants:

  •  August Hatecke, UBS head of wealth management SEA;
  •  Francesco de Ferrari, Credit Suisse head of private banking Asia-Pacific, CEO SEA & frontier markets;
  •  Tan Su Shan, DBS Bank group head of consumer banking & wealth management;
  •  Lok Yim, Deutsche Bank head of wealth management Asia-Pacific;
  •  Philip Kunz, HSBC head of private banking SEA;
  •  Pierre Masclet, Indosuez wealth management Asia CEO and Singapore branch manager;
  •  Steven Lo, Citi private bank, regional head, Asia-Pacific;
  •  Ong Yeng Fang, UOB head of private bank and managing director.
  •  Ricardo Sanchez-Moreno, BNP Paribas head of wealth management, SEA;

Moderator: Siow Li Sen, The Business Times

Market voices on:

BT: How was your business in 2017?

August Hatecke: UBS wealth management Asia-Pacific achieved record financial results for full-year 2017. Invested assets reached a record high of Swiss francs (CHF) 373 billion (US$382.8 billion), an increase of 28 per cent year over year and the strongest growth since 2010. Net new money was excellent at CHF 28.4 billion, an increase of 37 per cent year over year. UBS wealth management Asia-Pacific made a strong profit contribution of 21 per cent to the bank's global wealth management division globally.

The results continue the bank's positive growth trajectory in the region in recent years. Over the last two years, UBS wealth management APAC's invested assets grew at a compound annual rate of 20 per cent, even as client adviser numbers have remained relatively consistent. Net new money of CHF 49.2 billion has been generated since 2015. It was also a record year for our mandates platforms which saw a significant growth in invested assets and client participation. Assets under management (AUM) under mandates rose 40 per cent.

Francesco de Ferrari: In 2017, our private banking business in Asia delivered another year of strong growth crossing the US$200 billion threshold (CHF 197 billion) in AUM, continuing the momentum of recent years and outperforming the industry. Our wealth management & connected (WMC) business spanning private banking, underwriting and advisory and financing holistically serves the nexus of our ultra high net worth clients' wealth and business needs. The WMC business grew revenues by 22 per cent to CHF2.3 billion and pre-tax income (PTI) by more than 60 per cent to CHF 799 million.

Private banking is a key contributor to these results, delivering 50 per cent higher PTI at over CHF 540 million, and 17 per cent higher revenues at CHF 1.6 billion. We saw strong agility across all three revenue lines, including growing recurring commissions and fees by 19 per cent and transaction-based revenues by 29 per cent.

Tan Su Shan: We hit several milestones in 2017. Our total wealth management AUM reached S$206 billion (year on year: +24 per cent). Our total income also increased by 25 per cent yoy to a record S$2.11 billion, driven by markets as well as new investment and insurance products launched this year.

Following the successful migration of ANZ's wealth management and retail banking business in five markets in Singapore, Hong Kong, Mainland China, Taiwan and Indonesia, it will take our business to the next level.

Lok Yim: The business achieved double-digit growth in both assets under management and revenue last year. Our North Asia business achieved double-digit growth in revenue. We focused even more on our Dubai office where we see a huge opportunity for our non-resident Indian clients segment given that it serves as a crossroads between Europe, Africa, the Middle East and Asia.

With the bank's huge support for wealth management business in APAC, we made more than 50 hires in different functionalities including client coverage, product, compliance, project management, IT, compliance, Know-Your-Client in Hong Kong, Singapore and Dubai.

Philip Kunz: In 2017, we continued to see strong growth in net new money inflows from clients referred to HSBC Private Banking through internal collaboration with our global businesses, in particular, our corporate banking team. This is in line with Singapore's increasing importance as a regional hub for global companies where there are now over 7,000 multinational corporations and 60 per cent have regional responsibilities.

Pierre Masclet: 2017 was a turning point for us at Indosuez Wealth Management. We took the opportunity of the competitive dynamics in the wealth management industry by acquiring CIC's private banking operations in Asia. This increased our staff strength by 60 per cent in the region. Business-wise, we saw a double-digit growth in revenue and registered strong solid client performance, bolstered by supportive financial markets.

We will continue to strengthen our footprint in onshore markets such as Singapore and Hong Kong by hiring experienced entrepreneurial talent and also by ramping up our external communications. The acquisition has undoubtedly allowed us to increase our visibility in the market among prospective clients and also within the industry allowing us the opportunity to hire senior relationship managers. In addition to the staff that came in through the CIC acquisition, we added 10 per cent more relationship managers to our ranks.

Steven Lo: Citi Private Bank had one of its best years ever in 2017 with record growth across all product lines and geography. The year started with strong momentum which was sustained throughout and until the end of the year. Revenue growth yoy was 24 per cent and net income yoy was 48 per cent powered by a 60 per cent increase in client acquisition.

Ong Yeng Fang: Over the last three years, we have more than doubled the number of our private bankers in Singapore and enhanced our platform and product capabilities. These investments have helped to generate a 35 per cent increase in UOB's total wealth management assets under management in 2017. Total wealth management has reached S$104 billion and comprises its privilege banking and high net worth segments.

BT: Many have reported strong results, what were the challenges amid the plenty?

Mr de Ferrari: Notwithstanding this outstanding financial performance against such long-term secular growth prospects in the region, I believe that as an industry and not just at Credit Suisse, we must not be complacent and lose sight of the need to change and evolve for the long term, in such a rapidly changing environment, from regulatory expectations around transparency, suitability and personal accountability, to a new generation of clients' changing preferences, and new competitors be it local players or fintech incumbents.

The world is moving at such a pace that we cannot just focus on our own industry, but need to look beyond and outside. Looking ahead, our focus at Credit Suisse is beyond just 2018 but in the coming five years, to stay head of the game in adapting to the changing environment, and to ensure we are "Fit for the Future".

Ricardo Sanchez-Moreno: Growth has indeed been the mark of 2017 for BNP Paribas Wealth Management in the region. Adapting to a new digital world and improving overall operational efficiency have been and remain key in an environment of increasing operational complexity and costs.

Mr Masclet: The transnational regulatory environment continues to be a dominant challenge for banks in the region. Banks must embrace and implement regulation fully and promptly, with the aim of increasing value and experience for their clients. As wealth managers, we must be able to clearly articulate and demonstrate the value of regulatory-driven changes for our clients, including higher service quality, helping clients better understand their risk appetite and most importantly, provide greater transparency over products and pricing models.

With the changing and evolving financial markets and regulatory environment, it is necessary to continue to provide our clients with local access to local talent with deep knowledge and expertise in all locations we operate.

BT: What's your 2018 outlook?

Mr de Ferrari: In Q4 2017 and the start of the year, our message to clients was to reposition portfolios away from low-yielding/long-duration assets and move into assets that can benefit from a stronger growth (and potentially higher inflation) environment. This approach has paid off but we also now see emerging opportunities in the fixed-income space as interest rates have moved to levels which are far more attractive.

Structurally we have seen clients holding relatively larger cash balances last year as they waited for more volatile markets/better entry opportunities and those clients are now actively looking to add to their portfolios across asset classes.

Mr Masclet: With regards to emerging markets, these are still under owned and we remain convinced by long-term prospects of EM, especially Asia. In the long term, we favour specific thematic ideas like ageing population, new consuming trends and disruptive technologies. For fixed income, we remain cautious as tight spreads make bonds vulnerable for any corporate-specific market impact or event. Rates will be moving higher, albeit slowly, central banks will be the main driver for yields.

For commodities, we see oil at this level stabilising for the year. Strong demand being offset by the increased US shale production and a possible scenario of Russia stepping out of the Opec production cuts will largely keep the market equilibrium as-is. For gold, we are positive over the medium term and advise our clients to buy on dips. For base metals, we see short-term profit-taking but remain positive in general.

Mr Hatecke: In terms of investment outlook for 2018, we recommend that investors continue to maintain a balanced investment portfolio. Markets are likely to be impacted by the ongoing withdrawal of liquidity by central banks. However, UBS CIO believes that equities can continue to deliver returns in an environment of strong earnings growth and inflation as well as rates that rise gradually. In our country allocation, we prefer regions that perform better later in the cycle, such as Asia, the eurozone and emerging markets.

Mr Lo: In our 2018 investment outlooks, we highlighted our expectations for higher growth and higher interest rates, which are likely to be accompanied by higher volatility. We believe the past two weeks of market shake-up is a restoration towards more normal market conditions after an unusually long period of low volatility.

However, this does not represent the end of this business cycle and we continue to expect positive investment returns in the coming year where equities are still likely to outperform. Our clients are generally receptive to this view. They have not aggressively participated in the rally and have significant cash balances that can be deployed to take advantage of short-term market setbacks.

Supplement editor: Siow Li Sen Sub-editor: Agnes Wee BT artists: Simon Ang, Ho Yan Hao Advertising sales: Jonathan Kee 9835 5400; Adeline Sim 9824 5086