Standard Chartered Plc (2888)’s Asian private-bank asset growth has stagnated this year as the lender focused on wealthier clients and investment returns were curtailed by volatility in regional financial markets.
Assets managed in Asia excluding the Indian sub-continent and the Middle East have stayed at about $35 billion, the same as at the end of 2012, said Rajesh Malkani, the private bank’s head of Northeast and Southeast Asia. Globally, Standard Chartered started increasing from late last year the investment threshold for private-bank clients to $2 million, double the previous level, he said.
“What we don’t want to end up doing is creating a lower-end private bank,” Malkani said in an interview in Singapore last week. “As clients become more informed, you have to keep raising your own bar.”
A Cap Gemini SA (CAP) and Royal Bank of Canada report last month signaled wealth of Asian millionaires may top North America as soon as next year. Asian stocks outside Japan slumped earlier this year, while currencies have tumbled amid an economic slowdown in China and India and growing concern the U.S. Federal Reserve will curb its stimulus program.
The MSCI Asia-Pacific Index excluding Japan is up 2.5 percent this year, compared with a more than 17 percent gain for the MSCI World Index. The Asian gauge slumped 12 percent in 2013 to its June low, driving 10-day volatility to the highest level since December 2011, data compiled by Bloomberg show.
India’s rupee and Indonesia’s rupiah slumped more than 10 percent against the dollar this year, making them the third- and fourth-worst performing emerging-market currencies, the data show.
Standard Chartered, which got more than 70 percent of its 2012 pretax profit from the Asia-Pacific region, re-entered private banking in 2006, after selling out to Swiss Bank Corp. in 1996.
The $860 million acquisition of American Express Co. (AXP:US)’s banking unit in March 2008 gave Standard Chartered about $22.5 billion of assets under management and 120 relationship managers. Today, it manages $50 billion globally and has 450 relationship managers, almost 240 of whom are based in Singapore and Hong Kong, Malkani said.
Standard Chartered’s private bank has “continued to grow at a very decent clip” if clients with less than $2 million were not excluded from the calculation and the market losses ignored, he said.
Its $35 billion of assets ranked it as the Asia-Pacific region’s 12th-largest private bank in 2012, according to a study by Private Banker International released last week. UBS AG (UBSN), Switzerland’s largest lender, was the region’s biggest with $215 billion, while Citigroup Inc. was second with $210 billion, according to Private Banker.
“We need to look at how productive” a private bank’s assets under management are in terms of revenue and profits, said Malkani. “AUM for the sake of AUM means nothing.”
Standard Chartered’s private bank runs at a cost-to-income ratio “at the lower end of the industry range,” said Malkani, without disclosing numbers.
Global private banks had an average cost-to-income ratio of 0.69 in 2012, PricewaterhouseCoopers LLP said in a June report. The average for Asia was 0.83, according to a September report from the consultant.
Asians with at least $1 million in investable assets are expected to see their riches climb to $15.9 trillion by 2015 from $12 trillion last year, according to Cap Gemini and Royal Bank of Canada’s 2013 Asia-Pacific Wealth Report released Sept. 25. North American high net-worth individuals held $12.7 trillion in 2012, the report showed.
Standard Chartered is focusing on a more wealthy tier of clients to generate higher fees and cover the rising cost of offering more “in-depth service” to increasingly knowledgeable wealthy individuals, Malkani said. Currently, the optimal number of clients per relationship manager should be 30, down from 50 a few years ago, he said, which would add to costs.
“Ultimately, a relationship manager loaded with too many clients is not going to be able to provide the right level of service and advice,” said Malkani.
The lender’s clients with investments of $100,000 to $2 million are serviced by its priority banking division, and those with $25,000 to $100,000 are serviced by the preferred banking unit, Malkani said.
Instead of moving down to the priority division, some existing clients “have topped up” to stay with the private bank, he said.
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