BNP Paribas SA (BNP) is outpacing the wealth-management businesses of French competitors Societe Generale SA (GLE) and Credit Agricole SA (ACA) as the country’s largest bank targets the super-rich in Asia and America.
Net inflows more than doubled to 7.5 billion euros ($9.8 billion) last year as the Paris-based company attracted money from clients in China, Singapore, Indonesia and Malaysia, wealth unit co-heads Vincent Lecomte and Sofia Merlo said in an interview. Societe Generale lured a net 1 billion euros, while Credit Agricole reported outflows of 2.7 billion euros in 2012.
French banks are fighting over rich emerging-market clients to boost revenue as tougher capital requirements crimp investment-banking profitability. BNP Paribas is expanding from its western European base, which accounts for about 60 percent of its wealth assets, to vie with bigger managers, including Switzerland’s UBS AG and Credit Suisse Group AG.
“BNP is in the Champions League of wealth management and there’s a clear difference in terms of size with its nearest French peers,” said Sebastian Dovey, founder of London-based research firm Scorpio Partnership. “The challenge for the top private banks is to create truly global ultra-high-net-worth businesses.”
While assets under management at BNP Paribas climbed 8.6 percent to 265 billion euros, that’s still barely a fifth of the funds at UBS, the biggest Swiss bank.
BNP Paribas hopes that Asia, where Lecomte and Merlo expect to double assets and revenue over the next three to five years, will help close the gap. Rich Asians may increase assets by more than 11 percent a year through 2016, according to a report last May by Boston Consulting Group.
Turkey, Poland and Morocco are also targets for expansion and BNP Paribas wants to attract more ultra-wealthy individuals with at least 25 million euros in investable assets.
“The growth in assets is in line with our target and it’s quite satisfactory compared with our peer group,” said Lecomte. “This is a business the bank is investing in.”
Revenue and profit rose at BNP Paribas’s wealth-management unit in 2012, while the business’s return-on-assets was little changed, Lecomte said, declining to provide further details.
BNP Paribas, which in 2009 expanded by taking over Fortis activities in countries such as Belgium and Luxembourg, in 2012 had 6.55 billion euros in annual net income, an 8.3 percent increase from a year earlier. Societe Generale’s full-year profit slumped 68 percent to 774 million euros while Credit Agricole had a record 6.47 billion-euro annual loss, partly hurt by the sale of its unprofitable Greek unit Emporiki Bank.
“SocGen and Credit Agricole are lagging BNP,” said Jacques-Pascal Porta, who helps manage about 600 million euros at Ofi Gestion Privee in Paris, including BNP and Societe Generale. “BNP’s image has been less shaken during the financial crisis, and that’s fundamental in wealth management.”
Societe Generale increased wealth-management assets 1.7 percent to 86.1 billion euros in 2012, even as France’s second- largest bank retreated from North America with the sale of a minority stake in U.S. Rockefeller Financial Services Inc. and its shares in Canadian Wealth Management Group Inc.
“2012 was as year of consolidation,” Jean-Francois Mazaud, head of private banking at Societe Generale, said in an e-mailed statement. “The wealth-management sector has had to confront significant changes since the start of the financial crisis.”
Before Europe’s sovereign debt crisis deepened, Societe Generale Private Bank’s former CEO had set a goal to reach 150 billion euros of assets by 2015.
The bank is targeting growth in Asia and Mazaud said the second half of last year showed a “clear turnaround” after a challenging 2011.
Societe Generale’s private-banking revenue and cost-to- income ratio improved in the fourth quarter and Mazaud expects the unit to deliver “strong performance” in 2013.
“Clients are now beginning to return to higher-yield solutions,” he said.
Credit Agricole’s private-banking managed assets rose 4.7 percent to about 132 billion euros last year as market and currency gains helped offset the sale of “non-core assets” in Latin America, the bank said Feb. 20..
Firms that can’t boost assets under management will struggle to alleviate margin pressures as regulatory and compliance costs grow, said Dovey.
To contact the reporters on this story: Giles Broom in Geneva at firstname.lastname@example.org; Fabio Benedetti-Valentini in Paris at email@example.com
To contact the editor responsible for this story: Frank Connelly at firstname.lastname@example.org