European Private Banking Study 2012 EUROGROUP CONSULTING
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
EUROGROUP CONSULTING Best Practices
•
Increasing Income vs. Reducing Costs
•
Detailed Analysis of Selected Countries
•
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
3.
on How to Master the Challenges
4.
EUROGROUP CONSULTING Market
Expertise on Private Banking in Europe
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 2 of 96
Pressure on profitability forces Private Banking providers to transform operating models and to adapt strategies to changing environments (1/3)
The core challenge that Private Banking providers are currently confronted with is a marketinherent pressure on profitability. Particular aspects of this profitability pressure refer to internal structures of Private Banking providers: • Operating models reflect cost intensive structures along the value chain that are not opportune during current times of decreasing margins and deteriorating profitability • Extensive IT infrastructures cause high IT costs that burden the financial results and restrain innovative undertakings • A toughening price competition questions traditional pricing models
Other aspects impacting the pressure on profitability are caused by external factors due to developments in the Private Banking market: • Growing regulatory requirements require increasing efforts to implement and fulfil these requirements • A rather defensive client behaviour due to uncertainty and risk aversion leads to a decreasing demand of high-margin products • An emerging new client generation with different requirements forces adaptations towards a different clientele in order to improve client retention
Private Banking Study 2012 EUROGROUP CONSULTING / Page 3 of 96
Pressure on profitability forces Private Banking providers to transform operating models and to adapt strategies to changing environments (2/3)
Both internal and external aspects have to be integrated into corporate strategies as well as the operating model of Private Banking providers in order to create a cost efficient and competitive organisation. Besides efficiency and competitive edge, the different aspects of challenges furthermore trigger Private Banking providers to reinforce the importance of sustainable personal relationships with their clients. Combining these internal and external challenges with the importance of personal client relationships, Private Banking providers are advised to apply measures, which are consequently aligned to stabilise or increase income respectively to stabilise or reduce costs while at the same time consider client centric adaptations.
Specific measures has developed into applicable best practices for mastering these challenges. Any strategic adaptation addressing these challenges must be conceptualised and implemented with regards to its interdependency on operational business. Any introduced best practice, regardless if addressing an improvement of income or costs structures, or an optimisation of client relationship issues, responds to strategic questions.
Private Banking Study 2012 EUROGROUP CONSULTING / Page 4 of 96
Pressure on profitability forces Private Banking providers to transform operating models and to adapt strategies to changing environments (3/3)
Applicable best practices describing appropriate adaptations include a number of topics: • • • • • • • •
Identifying and transferring Retail Banking business to Private Banking Releasing silent potentials of small and medium enterprise clientele Establishing novel pricing models Diversifying according to specific client segments Increasing transparency on products and advisory Differentiating offerings of value adding services Enhancing quality of relationship management processes Evaluating sourcing options for non value adding services
These best practices can motivate corporate strategies of Private Banking providers. Multidimensional differentiations of client segments and differentiations of value adding products and services are also core elements of corporate strategy, in order to adapt the value chain or sourcing of non value adding middle and back office services. These best practices and their strategic adaptations present opportunities for Private Banking providers to successfully and sustainably prepare their organisations for future undertakings.
Private Banking Study 2012 EUROGROUP CONSULTING / Page 5 of 96
The study analyses Private Banking providers and affluent individuals from eleven representative European countries
AuM1 of analysed countries: € 7,053 bn
Affluent individuals in 2011: 3.4 mn
Market Shares in analysed countries Bandwidth of market share in European countries
CAGR2: 2.6%
in mn 5 4
3.2
3.2
3.4
3.6 (e)
3.9 (e)
3
Corporate banks
9%
87%
Private banks
18%
48%
Savings/union banks
32%
43%
Other
3%
9%
2 1 0
2007
Total Private Banking AuM 2011: • Germany: € 1,505 bn • Great Britain: € 1,465 bn • Italy: € 1,085 bn • France: € 907 bn • Spain: € 675 bn • Switzerland: € 382 bn • The Netherlands: € 285 bn • Luxembourg: € 260 bn • Austria: € 190 bn • Sweden: € 175 bn • Portugal: € 124 bn Private Banking Study 2012 EUROGROUP CONSULTING / Page 6 of 96
2009
2011
2013
2015
The chart above depicts the number of affluent individuals in the eleven countries outlined on the left. The study focuses on affluent individuals, defined as holding liquid assets of € 300,000 or more. In accordance with that definition, all individuals with higher liquid assets than affluent individuals (high net worth, very high net worth, ultra high net worth individuals) are subject to the study.
The study differentiates between four major classifications of Private Banking providers: • Corporate banks • Private banks • Savings and union banks • Other (individually specialised or country-specific institutions)
1) AuM = Assets under Management 2) CAGR = Compound Annual Growth Rate Source: Datamonitor Western European Wealth Markets Database 2011; EGC Research
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
EUROGROUP CONSULTING Best Practices
•
Increasing Income vs. Reducing Costs
•
Detailed Analysis of Selected Countries
•
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
3.
on How to Master the Challenges
4.
EUROGROUP CONSULTING Market
Expertise on Private Banking in Europe
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 7 of 96
The core challenge that Private Banking providers are currently confronted with is an market inherent pressure on profitability
1 Operating Model The cost structure along the value chain of Private Banking providers is a remnant of previous times, when profits were increasing, but it is relatively cost intensive in times of decreasing margins and deteriorating profitability
2 Regulatory Requirements Increasing regulatory requirements force Private Banking providers to increase efforts and expenses in order to implement and fulfill these requirements
3 IT Costs Extensive IT infrastructures cause relatively high IT costs that burden the financial results and restrain innovation of Private Banking providers
Pressure on Profitability
Private Banking providers are confronted with a toughening price competition in which their margins decrease 4 Pricing Private Banking Study 2012 EUROGROUP CONSULTING / Page 8 of 96
Clients have become more risk averse and tend to invest increasingly into defensive products 5 Defensive Client Behaviour
A new client generation with different requirements is emerging in Private Banking. No or late adaption to new client needs increase the clients’ willingness to change their Private Banking provider 6 Next Generation
The existing operating model presents Private Banking providers with a challenge in times of declining profitability
1 Operating Model Revenues (R) and Total Costs (C) per Employee (E) • The average revenue per employee decreased by approximately 26% in the course of the past five years
€ (in ‘000) 400
• Reasons for this development are foremost the financial crisis and as a consequence the changed behaviour of Private Banking clients
350 300
i
250
ii
200 150 2006
2007
2008
2009
R/E Average C/E Average (Average of Austria, Benelux, France, Germany, Italy, UK, Switzerland)
2010
• During the same period of time, average costs per employee merely decreased by approximately 14% • This difference results from the fact that Private Banking providers have not substantially changed their cost structures. The decline in revenue has not been countered by equivalent adjustments of the operating model
• The operating model is the abstract representation of how an organisation operates across process, organisation and technology domains in order to deliver value defined by the organisation in scope • Private Banking providers face decreasing revenues per employee, while costs per employee decrease as well but not at the same rate; see graph for comparison of revenues and costs per employee in 2007 (i) and 2010 (ii) • In summary, the times of reliable profitability have passed and even when financial markets rose again, the relation between revenues per employee and costs per employee could not have been improved Private Banking Study 2012 EUROGROUP CONSULTING / Page 9 of 96
Source: University of Zurich, The International Private Banking Study 2007, 2009, 2011
Optimising cost and/or income structures requires a well considered analysis of any strategic impact on the operating model
1 Operating Model
Income structure depends on client basis, regional diversification, product portfolio and sales strategies. Additionally, changes in market trends and market environment have impact on the profitability of the chosen operating model. Attempts of increasing income have to take into consideration interdependencies between these components. Costs have to be distinguished into non personnel and personnel costs. Non personnel costs (e.g. real estate and IT) can mainly be adapted in the long run. Discretionary non personnel costs (e.g. sales initiatives) are mostly adapted to the current market environment. Personnel costs can be subject to short term adaptations, but could cause long term impacts on the operating model. Private Banking Study 2012 EUROGROUP CONSULTING / Page 10 of 96
Cost-Income-Ratio (CIR) 80%
75%
Deteriorating cost-incomeratios of Private Banking providers are to be seen as an indication for potential fields of action within the cost-income-structures of existing operating models.
70%
65%
60%
Changes to the operating model should be considered on a strategic level.
55%
50% 2006
2007
Germany Austria UK
2008 Italy Benelux
2009
2010 Switzerland France
Source: University of Zurich, The International Private Banking Study 2009, 2011
Increasing regulatory requirements force Private Banking providers to increase efforts and expenses in order to fulfill these requirements
2 Regulatory Requirements Regulatory requirements for Private Banking providers AIFMD
2011
2012
AIFMD
Consultation
National legislation
Commencement
EMIR
Consultation
National legislation
Commencement
Dodd-Frank Act
Successive implementation
EMIR
Private Banking providers
Basel III/CRD IV
Timeline of commencements 2014
etc.
Commencement
Dodd-Frank Act FATCA
MiFID II
MiFID II
2013
FATCA
Basel III/CRD IV
Consultation
Consultation
Consultation
Commencement
National legislation
Commencement
Commencement
• Regulatory requirements increase as legal bodies on international, European and national level pass various binding guidelines, e.g. Basel III/CRD IV, MiFID II, AIFMD, EMIR, Dodd-Frank Act, FATCA • These guidelines result in national legislations relevant for Private Banking providers, causing substantial need for modifications throughout the organisation • As the effective dates of the regulations are well known in advance, Private Banking providers should use these lead times for preparing themselves in order to assure a smooth implementation of the regulations Private Banking Study 2012 EUROGROUP CONSULTING / Page 11 of 96
The necessity to implement regulatory requirements results in a sustainable cost progression for Private Banking providers
2 Regulatory Requirements
Private Banking providers need to budget their implementation activities for regulatory requirements.
Amount/intensity
Interdependencies and complexity
In the course of planning implementation activities, interdependencies to other implementations have to be analysed, as these interdependencies drive the overall complexity of any implementation efforts.
Number of requirements
Time
Since the complexity as well as the pure number of regulatory requirements will increase in the course of years to come, the cost for implementing these requirements will grow accordingly. This cost progression is likely to emerge as an increasingly important factor for total costs of Private Banking providers.
Costs Requirement E Requirement C Requirement B Requirement A Year 1
Private Banking Study 2012 EUROGROUP CONSULTING / Page 12 of 96
Requirement D
Requirement D
Requirement C Requirement A Year 2
Requirement A Year 3
While adapting to regulatory requirements is a legal necessity, Private Banking providers should be aware of the cost developments related to these adaptations.
Extensive IT infrastructures cause relatively high IT costs that burden the financial results and restrain innovation of Private Banking providers
3 IT Costs Proportion of IT costs compared to total costs • During the last years, the proportion of IT costs declined from ~31.5% to ~27.5%
32%
31%
• Between 2002 and 2007, overall costs increased and the proportion of IT costs became smaller
30% 29%
• When total budgets were cut in 2008 due to the financial crisis, IT budgets could not be reduced proportionally
28% 27%
• As a consequence, the proportion of IT costs compared to total administrative costs has increased since 2007
26% 25%
• After years of decreasing, IT costs now tend to stand for an increasing part of total administrative costs
24% 23% 2002
2003
2004
2005
2006
2007
2008
2009
2010
• Increasing IT costs can result from rising complexity of operations and products, necessary reinvestments in outdated IT infrastructure, challenges involved in handling an increasing amount of regulatory initiatives, and missed opportunities for process adjustments. Inefficiencies in the existing IT architecture lead to disproportional increases in long term RTB IT costs
• More and more banks will have to spend most of their IT budgets to handle day-to-day operations instead of making fundamental changes in their IT architecture for sustainable solutions and efficiency gains • Potential options for an optimisation of structures of IT costs have to be evaluated in context with the overall IT strategy Private Banking Study 2012 EUROGROUP CONSULTING / Page 13 of 96
Legend: RTB IT-costs = IT-costs of the day-to-day IT-operations Source: EGC Research (selected cases from German corporate banks and savings and union banks)
Private Banking providers managing IT strategy proactively gain a competitive edge
3 IT Costs
Private Banking providers have to assure a failsafe and future proof IT infrastructure in order to minimise operational risks.
Managing IT strategy
Time-to-market
?
High IT costs restrain attractive margins of Private Banking providers as they become a main driver in total administrative costs.
The higher the proportion of the RTB IT costs, the lower the overall CTB budget for projects.
Private Banking providers which manage their IT strategy proactively consider the interdependencies between time-to-market, cost efficiency and operational stability.
!
Cost efficiency
Operational stability
The more IT projects have to be conducted, the smaller the remaining CTB budget for innovation or business driven projects. Private Banking Study 2012 EUROGROUP CONSULTING / Page 14 of 96
Legend: CTB-budget = change the bank project budget
As a result, strategic flexibility can be reached in order to address market trends and business innovation more efficiently.
Price competition emerges as a significant lever of Private Banking strategy
4 Pricing Effects on supply and demand sides
Adjusted gross margin per AuM In % (figures of 2006 equal 100%)
Supply side
Demand side
Foreign banks
Competition
Client retention
Price competition
Niche competitors (incl. retail banks)
Margin
Demand for highmargin products
120 115 110 105 100 95 90 85 80 75 70 65 60 2006
2007 Average
2008 Germany
2009 Switzerland
2010 France
• Competition increases as new Private Banking players enter the market, e.g. foreign banks. New niche competitors (e.g. specialised institutes for investment managers) and Private Banking units from savings and union banks capture market share • The increase on the supply side is accompanied by a decrease on the demand side: clients’ willingness to change increases and clients turn away from high margin products as they tend towards transparent and secure products. Clients demand transparency not only from products (low complexity, few derivative components) but also from the fee structures and pricing models that Private Banking providers are offering their clientele • As a result, Private Banking providers are confronted with a toughening price competition in which their margins decrease Private Banking Study 2012 EUROGROUP CONSULTING / Page 15 of 96
Legend: Average of Austria, Benelux, France, Germany, Italy, UK, Switzerland Source: University of Zurich, The International Private Banking Study 2007, 2009, 2011
The toughening price competition in the Private Banking market has to be addressed on a strategic level
4 Pricing
Private Banking providers may excel in differentiating themselves by a unique reputation. Having successfully established a distinct brand recognised by their clients allows realising higher prices without endangering client retention. Private Banking providers may increase efficiency by streamlining processes and operating structures. This results in a more competitive cost structure which allows reaching attractive profitability levels even at lower margins.
Private Banking institutes can differentiate themselves as a niche player by focusing on special needs of a distinct client segment (e.g. athletes) or product range (e.g. art investments).
Private Banking Study 2012 EUROGROUP CONSULTING / Page 16 of 96
Strategic options of differentiation Private Banking providers face price competition due to new competitors, deteriorating margins and also an increasing demand of transparency. Branding/ reputation
Segmentation (Retail vs. Private)
Cost containment
Niche strategy
This toughening price competition is best to be addressed by distinctly differentiating from other competitors. Thus, the differentiation has to be embedded in the overall strategy of Private Banking providers.
In the course of the last decade Private Banking clientele tended to pursue risk averse and defensive investment strategies
5 Defensive Client Behaviour Portfolio by assets in Western Europe in % 100 80
31
34
36
• In the last decade, investments in asset classes with minimal risks increased. Deposits and insurances accounted for 69% of total assets in 2009, while in 2000 only 59% were invested in these two asset classes • During that period of time, investments in securities were reduced by one fourth
60 38
33
28
• This development is, among others, one indication of changing client behaviour
28
29
33
2000
2005
2009
• Drivers of this development are mainly market uncertainty, risk aversion and the demand for transparency
40 20 0 Bank deposits
Securities
Insurances
Others
• Due to the severe uncertainty following the financial market crisis, clients have become more risk averse and tend to invest increasingly into defensive products, e.g. fixed deposit accounts • Clients also have become more passive (i.e. less transactions per customer) and demand higher transparency • Due to liquid assets, which bear lower margins, and less transactions, revenues per employee are decreasing • When generally low interest rates and rising inflation cause pressure on Private Banking clients to shift their investments into assets with higher interest rates, Private Banking providers have to focus on regaining revenues per employee Private Banking Study 2012 EUROGROUP CONSULTING / Page 17 of 96
Legend: Average of Austria, Benelux, France, Germany, Italy, UK, Switzerland Source; Allianz Global Wealth Report 2010
Private Banking providers need to understand clients' defensive behaviour as a long term strategic opportunity
5 Defensive Client Behaviour
Private Banking providers have to be aware that clients decreasingly invest in high risk asset classes. Caused by the current uncertainty of clients, they demand more transparent products.
Clients’ risk aversion Demand for complex highmargin products Demand for simple lowmargin products
New market players challenge the established concept of Private Banking and thus stress the existing relationships between relationship managers and their clients.
Private Banking providers are advised to invest in the enhancement of the skills of their relationship managers, since especially during tough market conditions, Private Banking clients’ demand for intensified attention increases. Private Banking Study 2012 EUROGROUP CONSULTING / Page 18 of 96
A trustful relationship with clients is one of the most crucial success factors for Private Banking providers.
Clients’ need for advisory/ personal contact Degree of client retention
Challenge for Private Banking providers: Trust building and establishment of closeness to clients based on superior advice
Investment in relationship management personnel (if applicable enticement of employees of competitors)
Source: EGC Research
Understanding of clients’ needs in terms of riskless products and transparent advisory
In times of a changing client behaviour, the management of these relations becomes more demanding. When investing in understanding clients and networking, Private Banking providers could seize opportunities in the course of this changing client behaviour.
A new client generation with different requirements is emerging in Private Banking
6 Next Generation Structural change of Private Banking clientele
Education
Entrepreneurship
Inheritance
New generation of Private Banking clients under the age of 50 years
Emerging client generation with new and different requirements
Digitalisation
Values
Information
Mobility
• New clients emerge due to professional careers of well educated individuals, a new generation of start-up entrepreneurship and inheritance, creating a Private Banking generation besides the established clientele older than 50 years of age • Private Banking providers are experienced and specialised in addressing clients older than 50 years, and only slowly adapt to adequately answer arising requirements such as the use of digital technology, shifting values etc. • This might lead to dissatisfaction among the new generation and thus enlarges their willingness of changing their Private Banking provider. Consequently, providers are advised to create a brand with an appealing reputation among the new generation Private Banking Study 2012 EUROGROUP CONSULTING / Page 19 of 96
An adequate strategy to approach the new generation clientele has to be developed in the context of personal relationships to that clientele
6 Next Generation
Digitalisation: Increasing use of digital media (e.g. providing reports electronically, as clients expect to process information on smart phones or tablets) Values: Conscious adaption of product portfolio and company action to emerging values (e.g. investment options in renewable energies)
Private Banking strategy centered on relationships
Digitalisation
Private Banking Study 2012 EUROGROUP CONSULTING / Page 20 of 96
Establishing a brand that combines values of the former generation with the profile of the new generation is an essential aspect of this Private Banking strategy.
Personal relationships
Information: Private Banking clients display more autonomy in financial issues (e.g. real-time streaming of market information on electronic devices) Mobility: Clients’ mobility is a new challenge for Private Banking providers (e.g. due to business travelling clients are only available outside the banks’ office hours)
Values
Information
Adapting to the requirements of the new generation is crucial for developing a future proof Private Banking strategy.
Mobility
The most important aspect of this strategy is creating and sustaining a personal relationship with the client.
The challenges for Private Banking providers have to be counteracted on a strategic level
The core challenge that Private Banking providers nowadays are confronted with is an market inherent pressure on profitability. Particular aspects of this profitability pressure might be caused by external factors: regulatory requirements and a changing behaviour of the Private Banking clientele cannot be influenced by Private Banking providers, but have to be integrated into the corporate strategies of the Private Banking providers. IT costs and pricing models, being two examples of internal factors, are to be addressed by the future strategy respectively the target operating model of Private Banking providers in order to create a cost-efficient and thus competitive organisation. The changing client behaviour and the emergence of a new generation reinforce the importance of sustainable personal relationships between Private Banking providers and their clients.
These relationships as well as internal and external factors have to be addressed by measures that are consequently aligned to stabilise or increase income respectively to stabilise or reduce costs. The following chapter describes equivalent measures in terms of best practices that constitute answers to the challenge of mastering the aspects on profitability in Private Banking, which were explained in this chapter. EUROGROUP CONSULTING gained substantial experience in these fields when working with
Private Banking providers in various European countries. Private Banking Study 2012 EUROGROUP CONSULTING / Page 21 of 96
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
EUROGROUP CONSULTING Best Practices
•
Increasing Income vs. Reducing Costs
•
Detailed Analysis of Selected Countries
•
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
3.
on How to Master the Challenges
4.
EUROGROUP CONSULTING Market
Expertise on Private Banking in Europe
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 22 of 96
EUROGROUP CONSULTING recommends eight Best Practices that address
improvement of profitability by optimisation of income and costs
Potential effects Income Costs A Identifying and transferring Retail Banking business to Private Banking B Releasing silent potentials of SME clientele
EUROGROUP CONSULTING Best Practices for stabilising or increasing income and stabilising or reducing costs
C Establishing novel pricing models D Diversifying according to specific client segments E Increasing transparency on products and advisory F Differentiating offerings of value adding services G Enhancing quality of relationship management processes H Sourcing options for non value adding services
Private Banking Study 2012 EUROGROUP CONSULTING / Page 23 of 96
The synergies with retail banking remain a strong leverage regarding client base development
A Identifying and transferring Retail Banking business to Private Banking Situation of status quo The buffer of private banking clients to be recruited has not been emptied yet, a growth potential remains, although this potential is focusing rather on affluent clients than on private wealth management clients from HNWI to VHNWI.
Complications in the current environment In this context, sharing retail/private banking benefits is a complex issue, for which complexity varies according to the business model of the universal bank. Three types of models are stand out: CB1 When private and retail banking are two distinct entities, the sales
Synergies with retail banking remain a strong leverage regarding client base development which should be activated and optimised by commercial banks.
When private and retail banking activities belong to the same CB2 business line, gain sharing is easier to operate
CM Multi-entity banks are those gathering several retail entities on the
territory. This type of banking model regularly faces governance issues as the several entities hardly accept the transfer of their premium clients to private banking
Power/gain sharing stake +
The success of synergies when operating with retail banking relies on the capacity of banking groups to bring retail activities to accept separation of their most significant clients.
representatives of the retail entity are less likely to transfer their clients
The exploitation of sourcing synergies is more complex within universal banks than traditional private banks, as retail and private banking compete for similar client servicing. Synergies related to other banking activities such as corporate banking are not subject to such issues.
CM
CB1
CB2
-
Private Banking Study 2012 EUROGROUP CONSULTING / Page 24 of 96
+
Group integration level / potential of development by synergy
Dedicated sourcing methods reinforce client knowledge and incentive the retail organisation to seek clients wealth
A Identifying and transferring Retail Banking business to Private Banking Suggested solution
Benefit for Private Banking provider
A set of key leverage actions allow commercial banks to increase and enhance synergies between retail and private banking:
Development of client potential is greatly enhanced with its upgrade from retail organisation to private banking organisation
• Establish clear and shared directives at top executive level, supported by each management level
• Private banking growth in the affluent segment can be great even in a constrained economical environment
• Design incentive sharing rules regarding NBP, combined to a reliable reporting facility for retail network
• Potentials with HNWI and VHNWI individuals can also be detected through synergies
• Ensure integration of the synergies operated with private banking in the variable part of retail network advisors
Dedicated sourcing methods reinforce client knowledge and incite retail organisations to seek clients wealth.
• Organise regular animation and training of retail network by the private banking in order to increase network skills with regards to private banking promotion
Successful retail/private banking synergies can benefit commercial bank activities with more regular exchanges performed across the organisation.
• Implement private clients’ identification methods which do not depend on individual initiative (e.g. systematic identification by scanning customer basis, recruiting campaign with direct marketing targeting clients with potential)
Private Banking Study 2012 EUROGROUP CONSULTING / Page 25 of 96
The seizing of existing business relations to SMEs for Private Banking purposes is a challenge for most banking institutions
B Releasing silent potentials of SME clientele Situation of status quo
Complications in the current environment
Within banking institutions servicing retail, private and corporate banking, small and medium sized enterprises (SME) are clients of the corporate banking division, but their wealthy entrepreneurs and managers oftentimes do not hold accounts with the private banking division, although they would belong to the group of private banking target clients.
• The relationship managers responsible for the bank’s SME business do not network with their colleagues of the private banking unit
Bank
Retail banking Entrepreneur/manager is not client of private banking unit
Private banking
Corporate banking
X
SME
Private Banking Study 2012 EUROGROUP CONSULTING / Page 26 of 96
Although entrepreneurs and managers are known to the bank, the bank only services the corporate needs of their SME, but does not seize the potential of a business relationship to the entrepreneurs and managers as private persons.
etc.
SME is client of corporate banking unit
• In case of a joint relationship to the client as SME client and private banking client, the relationship managers of the units corporate and private banking have to share revenues and costs • This sharing of revenues and costs influences the contribution of the corporate and private banking units to the bank’s overall profit and loss account. Finally, the responsible board members of the bank are affected by that revenue/cost sharing
Integrating a Private Banking subdivision into the SME business is a key success factor for accessing SME entrepreneurs and managers
B Releasing silent potentials of SME clientele Suggested solution
Benefit for Private Banking provider
Within the corporate banking unit, a new sub-unit for private banking is to be established. This unit is only serving private banking clientele deriving from corporate banking. The unit is to be staffed with relationship managers from the private banking unit. These managers must dispense their existing clients.
Private banking
Corporate banking
Unit 1
Unit 1
Unit 2
Unit 2
etc.
etc. Priv. bank. sub-unit
Private Banking Study 2012 EUROGROUP CONSULTING / Page 27 of 96
There is no longer a sharing of revenues and costs since both affect the profit and loss account of solely one unit of the bank, namely the corporate banking unit. • The knowledge of corporate banking relationship managers about the SME is paired with the private banking know-how of the private banking relationship managers
Bank
Retail banking
The bank gains access to the private wealth of SME entrepreneurs and managers. As a consequence, assets are gained and income is generated.
etc.
• Having transferred their existing clients to colleagues, the private banking relationship managers cannot rely on any client basis, but instead can fully focus on their new target clients • Both SME and private banking relationship managers report to the same board member
Bank
SME and its entrepreneur/ manager are client of bank
SME
Answering to client requirements and high value expectations are demanding challenges for the Private Banking providers
C Establishing novel pricing-models Situation of status quo
Complications in the current environment
While product and service offerings have always been drivers for a competitive edge in a high value environment such as private banking, economic crisis and the demand for transparency have streamlined overall competition.
In a context where protection becomes a stronger driver than performance and transparency a key factor for client retention, product and service offering for private banking is in search for reconstruction.
While diversity in the product and service offering in private banking remains high, there is seldom innovation. Wealthcare Effective for client sourcing Real estate Mainly for local/international HNWI
Art Mainly for local/international HNWI
Core offering (industrial portfolio management, life insurance, banking products) Mandatory for all clients Core offering, second level (Dedicated Portfolio management, complex wealth engineering, active advisory, structured products, private equity) Mandatory for net worth individuals Financing Effective for client sourcing
Private Banking Study 2012 EUROGROUP CONSULTING / Page 28 of 96
Family office Exclusively for VHNWI
Philanthropy Diversified offering for VHNWI Tax optimisation Mainly mass affluent Web banking Appreciated by next generation
• Traditional core offerings in terms of wealth engineering and portfolio management have suffered from the financial crisis and financial scandals entailing a loss of trust from clients • Regulatory requirements have put strong pressure on banks to improve transparency but also to simplify products so that they can be understood by clients. Product innovation in such an environment is not the success factor it used to be • Clients sensitivity towards existing pricing models is now an issue to be addressed with both transparency and low performances highlighting the effect of proportional management fees models
Innovation in the pricing model may be a source of a competitive edge in a streamlined product offering environment
C Establishing novel pricing models Suggested solution
Benefit for Private Banking provider
In the current environment, competitive edge in Private Banking is to be gained through high value client relationships and regained trust.
Differentiation through an innovative pricing model coupled with enhanced quality of servicing can generate a competitive edge on all client segments.
Building a strong advisory coupled with a transparent fixed price model would both increase value to the client and enhance cost to value of private banking services.
A fixed price model is a more linear, reliable and less volatile source of income. Enhance trust through product independent pricing model.
Example for variable pricing model based on client segmentation and service level
Ultra high net worth individuals
> € 5.0 mn
Very high net worth individuals
€ 2.5 5.0 mn
High net worth individuals
€ 1.0 2.5 mn
affluent
€ 0.5 1.0 mn
Mass affluent
€ 0.3 0.5 mn
Variable price structure
Segment 1: VHNWI Client differentiation required with enforced variable pricing
Segment 2: HNWI Twin pricing model with advisory on fixed price and variable transaction pricing Fixed price structure
Private Banking Study 2012 EUROGROUP CONSULTING / Page 29 of 96
Segment 3: Affluent High value package approach for advisory and Wealth mgt.
New client requirements
High value advisory
Trust and transparency
Fair pricing
Enhanced client relationship
Transparent value chain for client
Fixed price model
Client satisfaction
Increased market share
Streamlined revenues
• Whether to streamline revenues or increase client satisfaction through enhanced client relationship, innovation in pricing models is a key step for a competitive advantage
The predominant segmentation according to asset bands prevents Private Banking providers from a detailed analysis of the client structure
D Diversifying according to specific client segments Situation of status quo
Complications in the current environment
In most private banking practices nowadays, the client structure is segmented into asset bands. These asset bands usually differentiate private banking clientele into mass affluent, affluent, high net worth, very high net worth and ultra high net worth individuals.
This segmentation in asset bands is one-dimensional (horizontal) and does not take into account any personal specifics of clients (e.g. age, profession, ancestry). Strategic evaluations (e.g. for client acquisition strategies) are only based on the amount of assets a client is holding with the private banking provider.
Example for predominant taxonomy of client segmentation
Example for resulting possibilities for strategic positioning and development
Ultra high net worth individuals
> € 5.0 mn
Client segment A
Ultra high net worth individuals
> € 5.0 mn
Very high net worth individuals
€ 2.5 5.0 mn
Client segment B
Very high net worth individuals
€ 2.5 5.0 mn
High net worth individuals
€ 1.0 2.5 mn
Client segment C
High net worth individuals
€ 1.0 2.5 mn
Affluent
€ 0.5 1.0 mn
Client segment D
Affluent
€ 0.5 1.0 mn
Mass affluent
€ 0.3 0.5 mn
Mass affluent
€ 0.3 0.5 mn
Private Banking Study 2012 EUROGROUP CONSULTING / Page 30 of 96
Client segment E
target clients
existing client basis
Additional vertical segmentation enables an individualised penetration of a specific client segment strengthening relationships and income basis
D Diversifying according to specific client segments Suggested solution
Benefit for Private Banking provider
In a first step, appropriate segments for an additional vertical segmentation have to be defined (e.g. best agers, Islamic banking, next generation, on/offshore, freelancers). In a second step, the impact of this vertical segmentation on the organisational structure is to be assessed (depending on client structure and client acquisition strategy). Example for horizontal and vertical segmentation CEE client
next free- islamic etc. gener. lancer banking
> € 5.0 mn € 2.5 5.0 mn € 1.0 2.5 mn € 0.5 1.0 mn € 0.3 0.5 mn
Private Banking Study 2012 EUROGROUP CONSULTING / Page 31 of 96
Organisational relevance Scenario 1: Organising all subunits according to vertical segments
Scenario 2: Adding one sub-unit managing the dominant vertical segment
Scenario 3: Adding experts supporting with clients of vertical segments
Combining horizontal and vertical segmentation enables a detailed analysis of existing clients as well as target clients. Vertical segmentation increases client focus, and a better understanding of the clients leads to a closer relationship. The responsibility for each client is to be given to one single relationship manager, depending on the chosen scenario in terms of organisational relevance. • Depending on what vertical segmentation criteria are applicable to the private banking provider, the respective changes in the organisation are to be realised: In case vertical segments becomes predominant, the organisation might be changed completely in order to be aligned with these vertical segments With less dominance, vertical segments might only be supported by teams or by solitary experts (e.g. a Russian speaking private banker for CEE-countries) • This support of vertical segments makes the private banking provider capable of increasing income, strengthening existing business or developing new business
The advisory process is affected by a complexity deriving from non-transparent products and documentation requirements
E Increasing transparency on products and advisory Situation of status quo
Complications in the current environment
Financial innovations lead to complex and non-transparent products. Regulatory requirements caused multiple documentation guidelines.
The more complicated the advisory process becomes, the more challenging client contact becomes for relationship managers.
Both effects influence the advisory process in a way, that advising clients has become more complicated and timeconsuming.
Due to human instincts, clients tend to build up mistrust in situations where they do not fully understand the context.
Products
???? ???? ???
???? ???? ???
• Complex products are oftentimes hardly understandable for clients
???? ???? ???
• The documentation of complex products (mostly > 100 pages) is usually not studied properly by clients Advisory process Agreement/ relationship
Clients‘ demand/ sales initiative
Documentation
XXXXXXXX XXXXXXXX XXXXXXXX
• Bankers oftentimes lack the necessary amount of time to study these product documentations • The documentation requirements for client meetings demand substantial minute-taking and paperwork • This documentation efforts prevent bankers from spending their time on more value-adding activities • Bankers are endangered to lose focus on clients’ needs
Private Banking Study 2012 EUROGROUP CONSULTING / Page 32 of 96
An integrated approach embedding product information and documentation formalities enables a refocusing of advisory towards the client
E Increasing transparency on products and advisory Suggested solution
Benefit for Private Banking provider
Private banking providers have to set up a process of documentation for products as well as advisory that is featured by • a high degree of understanding by clients and
An integrated advisory process that is supported by master documents (that e.g. summarise product information and pool various necessary client signatures in one signature) improves the communication with clients, sustains trustful relationships and saves time for bankers.
• a low effort for relationship and investment managers
Products
!
!
• Private banking providers can centrally develop advisory process methodologies and master documents. These are used by relationship managers, who save the respective time for developing these tools on their own
!
Advisory process Agreement/ relationship
Clients‘ demand/ sales initiative
Documentation
Private Banking Study 2012 EUROGROUP CONSULTING / Page 33 of 96
• Private banking providers save costs since the relationship and investment managers’ time for preparing client meetings is reduced due to given methodologies and documents • New personnel can be centrally trained by the units developing the advisory tools • Client meetings are less influenced by formalities and instead can focus more consistently on clients’ needs
Substantial offerings of products and services to all client segments are cost intensive and inefficient
F Differentiating offerings of value adding services Situation of status quo
Complications in the current environment
Most private banking providers offer their total range of products and services to most of their clients. For rather cost intensive products and services, this could lead to low margins or even deficits when offering these products and services to affluent clients (due to lesser assets of affluent, average costs per product/service are relatively high).
Example for full product and service offering to all client segments
Ultra high net worth individuals
> € 5.0 mn
Very high net worth individuals
€ 2.5 5.0 mn
High net worth individuals
€ 1.0 2.5 mn
Affluent
€ 0.5 1.0 mn
Mass affluent
€ 0.3 0.5 mn
Although private banking providers apply a segmentation of affluent (e.g. € 0.3 - 1.0 mn) and net worth individuals (e.g. > € 1.0 mn), they do not consequently offer a standardised product/service range to affluent and a dedicated individualised product/service range to net worth individuals.
Example for differentiation in standardised and individualised segments
Ultra high net worth individuals
> € 5.0 mn
Very high net worth individuals
€ 2.5 5.0 mn
High net worth individuals
€ 1.0 2.5 mn
Affluent
€ 0.5 1.0 mn
Mass affluent
€ 0.3 0.5 mn
Misc.
Art
White label
Holdings Numismatics
Trusts
Real estate Insurance Inheritance
Financial planning
Active securities advisory Discretionary asset mgmt. mandates Financing/credits Payment and FX services
Private Banking Study 2012 EUROGROUP CONSULTING / Page 34 of 96
Net worth individ. (individualised products/services) Affluent (standardised products/services)
Differentiating value adding services from standardised offerings in accordance with client segments leads to cost efficiency
F Differentiating offerings of value adding services Suggested solution
Benefit for Private Banking provider
€ 2.5 5.0 mn € 1.0 – 2.5 mn
€ 0.5 1.0 mn € 0.3 – 0.5 mn
Private Banking Study 2012 EUROGROUP CONSULTING / Page 35 of 96
Financial planning
> € 5.0 mn
Art W. label Misc.
While the standardised range has to be defined in a way, that is sufficient for affluent, the individualised range represents the value-adding services for clients of the net worth individual segments.
Trusts Holdings Numismatics
Affluent are to be offered standardised products/services and individualised products/services (complex, cost intensive) have to be exclusively offered to net worth individuals (additional differentiation between net worth segments).
Active securities advisory Real estate Insurance Inheritance
Private banking providers reduce their costs by separating standardised and individualised product and service ranges.
Payment and FX services Financing/credits Discretionary asset mgmt. mandates
The segmentation of affluent and net worth individuals has to be applied to the product and service range.
• Standardised service offerings have to comprise all products/services to cover the demands of affluent clients • As these services are characterised by a high STP rate and a high degree of automation, they are cost efficient Inidividualised
Standardised
• The services that deliver added value to clients are costintensive and consequently are to be offered exclusively to clients holding an appropriate amount of assets • By applying this segmentation of product and service offerings, private banking providers are able to offer tailor made solutions while at the same time operating cost efficiently
Legend: STP = straight-through-processing
The review of processes and the distribution of added value tasks in respect of the level of clients service is a source of commercial efficiency
G Enhancing quality of relationship management processes Situation of status quo
Complications in the current environment
The maturity of commercial banking actors on private banking sector opens up new interesting and innovative perspectives on that segment regarding commercial efficiency, coming from retail banking best practices. The review of processes and the distribution of added value tasks in respect to the level of clients service is a source of commercial efficiency.
In an economic context that remains unstable and where actors’ profitability declined, improving profitability, through the optimisation of the relationship management processes, has become a key issue.
Three axis of optimsation
• In the private banking segment, there is no standardisation of portfolio size and the AuM managed by advisors are varying substantially
Relationship management processes optimised
Allocation of the resources
Private Banking Study 2012 EUROGROUP CONSULTING / Page 36 of 96
Well managed and optimised, the quality of relationship management processes allows for cost efficiency and client retention.
• The number of assistants in private banking varies between actors, the average ratio is weak if one considers that advisors devote more than half of their time to the administrative management of portfolios • Private banking advisor’s/private banker’s working time is not totally dedicated to value adding tasks
The front office organisation has to serve both goals of private banking actors: client service and productivity
G Enhancing quality of relationship management processes
• Monitor the adequacy of portfolio size vs. AuM and ensure a sufficient portfolio pureness • Rationalise the distribution of tasks between front office actors • Delegate administrative tasks requiring no particular proximity to the client
• Reconcile efficiency and client service • Ensure the productivity of advisors/private bankers and enable them to save time, especially for commercial purpose Distribution of tasks between front office actors according to customer type
AuM Private Bankers
A set of key leverage actions allow commercial banks to enhance quality of relationship management processes :
Benefit for Private Banking provider
Mass processing; reduction of unit cost
Private Banking Advisors
• Segment customer base in order to focus the interventions of experts on relevant topics and to implement service contracts framing the modalities to resort to experts
Assistants
• Industrialise client services as much as possible so that advisors can focus on value added tasks
Exp.
Selection of clients benefiting from expertise
VHNWI
Experts
Suggested solution
HNWI
Mass Affluent Level and cost of service
Private Banking Study 2012 EUROGROUP CONSULTING / Page 37 of 96
Due to high vertical integration, Private Banking providers perform several non value adding services
H Sourcing options for non value adding services Situation of status quo
Complications in the current environment
In general, private banking providers feature a high degree of vertical integration Their value chain comprises all relevant services. Whereas many front office oriented services comprise value adding functions, the more middle or back office oriented services are less value adding
Relationship mgmt.
Middle office Sales ctrlg.
Perform./ risk
Support service
This contradiction challenges the corporate strategy with regards to vertical integration and sourcing options • Non value adding services are likely to have a negative cost/benefit relation
Simplified value chain
Front office
Middle or back office services tend to be cost intensive, especially in relation to their added value. These non value adding services are rarely core competences and usually do not contribute to a competitive edge
Back office Settlement
Finance/ acctg.
• Depending on the degree of this negative relation and on the strategic importance of this non value adding service, the service needs to be assessed on a strategic level
Added value
Costs Value added ( = benefit)
Degree of added value for client along above value chain
Private Banking Study 2012 EUROGROUP CONSULTING / Page 38 of 96
Value chain
Economic and strategic aspects of non value adding services have to be assessed with regards to optimisation and sourcing opportunities
H Sourcing options for non value adding services Suggested solution
Benefit for Private Banking provider
Private banking providers are advised to analyse the respective fragments of the value chain, which contain non value adding services. Services that cannot be optimised with the result of becoming cost efficient and adding quality to the value chain, should be outsourced.
Front office Relationship mgmt.
Middle office Sales ctrlg.
Perform./ risk
Support service
Back office Settlement
Finance/ acctg.
First step: evaluating optimisation (strategy and cost/benefit analysis) Second step: assessment of sourcing options
Private Banking Study 2012 EUROGROUP CONSULTING / Page 39 of 96
Non value adding services, whose optimisation is not economic, should be outsourced in order to improve cost efficiency. In case an optimisation is economic and the private banking provider takes a market leadership in this service, this service could be offered and sold externally (e.g. providers are offering their settlement services to smaller providers or independent investment managers). Example scenario 1: service-leadership and external offering of service • A certain non value adding service (e.g. settlement) is optimised. • This optimised service can be offered to other banking institutions. • This service offering would create additional income and overcompensate costs that were caused by optimisation activities. Example scenario 2: outsourcing of inefficient service • A certain non value adding service (e.g. settlement) is not worth optimising due to a negative result of an cost/benefit analysis. • This service is to be outsourced. • The outsourcing of this service reduces RTB costs and prevents from any future CTB efforts for further developments.
External offering of optimised service
Back office Settlement
Finance/ acctg.
Back office Settlement
X
Finance/ acctg.
Outsourcing of inefficient service
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
on How to Master the Challenges
•
Increasing Income vs. Reducing Costs
EUROGROUP CONSULTING Market
•
Detailed Analysis of Selected Countries
3.
4.
EUROGROUP CONSULTING Best Practices
Expertise on Private Banking in Europe i. ii. iii. iv. v.
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 40 of 96
•
The Austrian Private Banking Market The French Private Banking Market The German Private Banking Market The Italian Private Banking Market The Swedish Private Banking Market
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
The recent years brought extensive challenges to the Austrian private banking industry
Austrian banks are mainly concerned with economic and regulatory trends, primarily due to the increasing costs of compliance which challenge the profitability. The sector is also battling a lack of trust that took a beating and made the clients increasingly cautious. With more advisory and a sharpened sense of risk, things should improve again. The past years of financial crises, the affluent population with liquid assets of more than € 300,000 witnessed a distinct decrease in all segments (UHNWI, HNWI, AI, MAI). The cost side has decreased but is unfortunately not mirrored by the profitability and the revenues of the Austrian banks. Especially the gross profit per employee declined by 5% between the years 2009 - 2010. The challenge being the low margins and the decreasing profits.
Austrian banks try to leverage their geographic proximity to CEE and CIS countries, and their geographic position as a hub between Eastern and Western Europe. They view CEE and the CIS as their primary growth markets, while banks located on the western border of Austria view Germany as the big growth market on their doorstep. Experts predict a CAGR of approximately 4% per year until 2014. The most significant growth is expected in the segment of UHNWIs.
Private Banking Study 2012 EUROGROUP CONSULTING / Page 41 of 96
The Austrian market distinguishes mainly between the Private Banking and Wealth Management sectors based on the liquid assets of its clients
Asset bands
Client segment
>€ 2 mn
€ 1 - € 2 mn
€ 0.5 - € 1 mn
€ 0.3 - € 0.5 mn
# Individuals (2011) Banking sector
Very High Net Worth Individuals
~5,000
Family offices and Wealth Management
High Net Worth Individuals
~10,000
Private Banking
Affluent Individuals
~24,000
Private Banking
Mass Affluent Individuals
~48,000
Private Banking/Retail Banking
• The asset bands are mainly used for client segmentation and international comparison purposes, however in the Austrian Private Banking sector, the differentiation regarding services occurs between the UHNWIs and the rest of the affluent population • Only the UHNWIs are serviced by Wealth Management and the others by Private banking • The affluent, mass affluent and high net worth individuals with liquid assets of more than € 300,000 make up ~ 20% of the total liquid assets • The wealth of the UHNWIs equals to ~10% of the total liquid assets in the market Private Banking Study 2012 EUROGROUP CONSULTING / Page 42 of 96
Source: Datamonitor Western European Wealth Markets Database 2011
The growth of the affluent population and their assets is expected to continue in the coming years
Development of client target groups in Austria 100
€ bn
Number of affluent individuals (in ‘000)
90 80
5
70
9
60
Development of liquid assets by asset band
23
50
5 5 9
9
23
5
5
10
10
24
24
6
6
10
11
6
90
11
80 70
25
25
26
40
44
45
42
48
48
52
51
55
33
12
13
12
13
13
14
12
11
16
17
18
18
15
17
19
16
17
16
17
18
18
19
19
20
2007
2008
2009
2010
2011
2012e
2013e
2014e
20 10
10
0
0 2007
2008
2009
€ 0.3 - € 0.5 mn
•
33
31 29
30
30
•
30
37
50
22
40
20
60
39
35
2010 € 0.5 - € 1 mn
2011
2012e
€ 1 - € 2 mn
2013e
2014e
The years after the financial crises in 2008 has showed a rather slow recovery of the overall affluent population According to surveys, an average annual growth of 4% in the affluent population is expected within the next three years, resulting in approximately 98,000 affluent individuals in Austria in 2014
Private Banking Study 2012 EUROGROUP CONSULTING / Page 43 of 96
€ 0.3 - € 0.5 mn
> € 2 mn
€ 0.5 - € 1 mn
€ 1 - € 2 mn
> € 2 mn
•
The crisis in 2008 lead to a loss of €4bn compared to the year before
•
Experts predict a CAGR1 of ~4% until 2014 with an expected total of € 92 bn. The most significant increase is expected in the segment of VHNWIs with an expected total value of € 39 bn
1) CAGR: Compound Annual Growth Rate Source: Datamonitor Western European Wealth Markets Database 2011
The Austrian Private Banking market is lead by commercial banks with the largest market share, followed by savings and union banks
Private Banking sector
Institution (extract)
Commercial banks
•
Bank Austria Private Banking
•
UBS Private Banking
•
Credit Suisse Luxembourg, Austria branch
•
Deutsche Bank Private Wealth Management
•
Erste Bank Private Banking
•
Volksbank Vorarlberg Group, Private Banking
•
Kathrein & Co. Privatbank AG
•
Privat Bank AG, Raiffeisenlandesbank Oberösterreich
•
Bankhaus Krentschker & Co. AG
•
Bank Gutmann AG
•
Bankhaus Carl Spängler Co. AG
•
Capital Bank AG
Savings and union banks
Private banks
Private Banking Study 2012 EUROGROUP CONSULTING / Page 44 of 96
Market share 2011 in Private Banking (in % of AuM)
22%
42%
36%
Private banks
Savings and union banks
Commercial banks
With cost cutting measures Austrian banks managed to improve CIR
Key performance ratios for the Austrian Private Banking market
Austrian Private Banking market
Key findings
Development (2009 - 2010)
2009
2010
Adjusted gross margin on AuM (in bps)
51
53
+4%
Total revenue per employee (in k€)
216
215
-0.5%
Personnel costs per employee (in k€)
124
118
-5%
Cost-income-ratio (before depreciation)
69%
67%
-2%
72
68
-5%
Gross profit per employee (in k€)
Private Banking Study 2012 EUROGROUP CONSULTING / Page 45 of 96
Source: University of Zurich, The International Private Banking Study 2011
• The slow but stable recovery in the Austrian Private Banking market is reflected in the increasing margins. The adjusted gross margin on AuM showed an increase of 4% from 2009 to 2010, however there is still room for improvement on margins • Through cost cutting measures Austrian private banks were able to reduce costs, especially on the personnel side by 5% • The slight increase in gross margins and the decrease in the personnel costs had a positive effect on the CIR, which recorded a 2% reduction on the national average • The positive development on the cost side is not mirrored by the profitability and revenues of the Austrian banks. Especially the gross profit per employee deteriorated by 5% from 2009 to 2010
Based on client segmentation the private banking providers operate under different business models
Type of bank
Threshold (€k)1
Description of the business models
Commercial banks
PB
• Private banking services backed by a strong international bank in the background
WM
75 2,000
• Broad bandwidth of clientele • Cross selling opportunities (between Retail and Private Banking) • Specialised products
Savings and union banks
PB WM
150 1,000
• High density branch network • Use of own products, flexible design of new products in cooperation with the network partners • Predominantly all-in-fee models • Specialised on the individual client
Private banks
300
• Individual advisory, intensive use of third party products
WM
2,000
• Expertise in Private Banking products as the sole focus
FO
3,000
• Exclusivity and tradition as a main characteristic of the bank as an institution
PB
• Specialisation on families, trusts and foundations
Private Banking Study 2012 EUROGROUP CONSULTING / Page 46 of 96
1) Extract/samples Legend: PB = Private Banking; WM = Wealth Management; FO = Family Office
Differentiation in product and service offerings is not a distinct unique selling point among the different providers
Common services
Specialised services
Exclusive services
Offered by more than 90% of the banking providers
Offered by ~60 - 80% of the banking providers
Offered by less than 30% of the banking providers
• • • • •
• Special and large scale investor funds • Individualised wealth management • Market research, online market information • Online wealth reporting • Financial, contingency and succession planning • Trust services • Online trading
• • • • •
Investment/wealth advisory Online account access Advisory on individual securities Insurance advisory Standardised wealth management
Internal/external family office Offshore services/solutions Charity services VIP services Art banking
Standard product and service chain Customised products and services
Product and service focus by banking providers
• Commercial banks • Savings and union banks • Private banks Private Banking Study 2012 EUROGROUP CONSULTING / Page 47 of 96
• Commercial banks • Savings and union banks1 • Private banks
• Private banks • Commercial banks
1) Limited scope Source: University of Zurich, The International Private Banking Study 2011
The financial instability has damaged the clients confidence in the banking providers, leading to more conservative and risk averse behavior
Advisory mandates and services
• Disclosures and advice relating to tax matters such as reporting, statements and post-tax performance analysis, as well as specific services around tax planning and structure demand • Looking primarily for an independent advisory approach, in which transparency and open product architecture are crucial and more important than performance – especially from CEE clients • Planning, implementation and servicing of trusts and private foundations • Constantly rising demand to set-up family offices
"Winnerproducts" in 2011
• Great demand for real assets, saving deposits as well as tried-and-tested investment instruments such as gold • Increasing demand for commodities
• Real-estate investments with significant demand due to inflation fear
Private Banking Study 2012 EUROGROUP CONSULTING / Page 48 of 96
Austrian Private Banking displays recovery, however the outlook is shaped by low growth rates, increasing competition and strict regulations
Dimension
Trends 2011 - 2012
Effect
Market
•
The market volume will not increase significantly
•
Crises in and around Europe, volatile and sensitive markets endanger recovery
Asset under Management
•
Exceptionally low interest rates
•
Increased competition due to low expected growth on affluent individuals, (e.g. financial networks (savings and union banks) vs. commercial banks) Expansion to international markets (e.g. CEE still advantageous to proximity) Need to react to changed client requirements performance, transparency and quality
Competition
• • Regulation/ supervision
Profitability
Customers
•
Anticipated loss of offshore-money due to changes in banking secrecy and confidentiality
•
New and strict regulations require to build-up specialised know-how and pose technical challenges (thus imply higher costs)
•
Revenue margins show slight growth, however are weak with 53 bps
•
Cost cutting measures start to pay-off, improving the CIR; continuous improvement necessary to off-set anticipated slow increase in revenues and profits
•
A sustained loss of clients` confidence
•
Incertitude towards market development result in risk aversion
•
Asset preservation instead of wealth growth primary target of clients
Private Banking Study 2012 EUROGROUP CONSULTING / Page 49 of 96
Profit
Cost Income Ratio
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
on How to Master the Challenges
•
Increasing Income vs. Reducing Costs
EUROGROUP CONSULTING Market
•
Detailed Analysis of Selected Countries
3.
4.
EUROGROUP CONSULTING Best Practices
Expertise on Private Banking in Europe i. ii. iii. iv. v.
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 50 of 96
•
The Austrian Private Banking Market The French Private Banking Market The German Private Banking Market The Italian Private Banking Market The Swedish Private Banking Market
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
In the financial crisis context, French Private Banking market turns out to be resilient and offers interesting growth perspectives
The actors of Private Wealth Management have recruited clients ensuring their growth. The increased prominence of universal banking, including the private wealth management segment, is challenging the historical domination of traditional private banking. In Private Banking, actors have enjoyed a significant growth over the last years, be it in terms of number of clients or in terms of assets under management. This progression has been almost exclusively the fact of universal banks, as no traditional private bank positioned itself on the segment of private banking and mass affluent. In Private Wealth Management, universal banks have achieved a particular effort on the higher segment of wealth. On the same period, traditional banks have recorded a lesser growth but remain leader on private banking market for HNWI. In a competitive market providing interesting growth opportunities despite the crisis, the actors of private banking – both universal banks and traditional private banks – are facing a double challenge of development and profitability.
Private Banking Study 2012 EUROGROUP CONSULTING / Page 51 of 96
The private banking market segment their clients according to HNWI, VHNWI, and UHNWI client segments
Asset bands
Client segment
>€ 2 mn
€ 1 - € 2 mn
€ 0.5 - € 1 mn
€ 0.3 - € 0.5 mn
# Individuals (2011) Banking sector
Very High Net Worth Individuals
~30,000
Wealth Management
High Net Worth Individuals
~54,000
Private Banking
Affluent Individuals
~127,000
Private Banking
Mass Affluent Individuals
~238,000
Private Banking/Retail Banking
• For Private Banking : The thresholds of private banking activity have remained stable over the period 2008/2011: the buffer of clients eligible to private management is significant therefore the adjustment of thresholds has not been necessary to maintain customers. As the sourcing potential is mainly internal for each institution, thresholds have to be adapted to business assets • For Private Wealth Management: Traditional banks have lowered their entrance threshold in order to adapt to the impacts of crisis on private wealth portfolio. The average threshold reduced from € 2.1 mn in 2008 to € 1.5 mn in 2011, enabling the actors to conserve the same number of eligible clients. Thus, the thresholds of traditional private banks are converging with those of the private wealth management activities of universal banks Private Banking Study 2012 EUROGROUP CONSULTING / Page 52 of 96
Source: Datamonitor Western European Wealth Markets Database 2011
Within the next two years experts expect a reinforcement of the current growth trend within the high net worth population
Development of client target groups in France 500
Number of affluent individuals (in ‘000)
450 400 350 300
28
28
51
51
125
124
29 52
126
30 54
129
Development of liquid assets by asset band 500
30
54
127
31
33
56
57
132
133
34 59
450 400
136
350 300
250
250
200
200
150 100
220
218
228
238
238
250
255
€ bn
265
180
179
191
197
208
165
164
170
69
69
72
74
66
67
71
66
86
89
90
90
94
95
98
86
83
82
85
89
89
94
94
99
2007
2008
2009
2010
2011
2012e
2013e
2014e
150 100
50
50
0
0 2007
2008
2009
€ 0.3 - € 0.5 mn
2010 € 0.5 - € 1 mn
2011
2012e
€ 1 - € 2 mn
2013e
2014e
•
France’s high net worth individuals increased in numbers during 2008/2009 even though the financial crisis, and has continued the growth until 2010 - 2011 when there was a minor decrease of 2.000 individuals
•
According to prognoses an ongoing rise is anticipated that will take the affluent population to about 494,000 by 2014
Private Banking Study 2012 EUROGROUP CONSULTING / Page 53 of 96
€ 0.3 - € 0.5 mn
> € 2 mn
€ 0.5 - € 1 mn
€ 1 - € 2 mn
> € 2 mn
•
French high net worth portfolios marginally declined in 2011 compared to their 2010 level. Total assets value dropped from € 428 bn to € 427 bn
•
Total value is expected to reach its highest level by 2014 (> € 479 bn)
Source: Datamonitor Western European Wealth Markets Database 2011
The French Private Banking market is categorised in four major sectors; commercial banks account for the most significant part
Private Banking sector
Institutions (extract)
Private banks, investment managers
• • •
Commercial banks
• • • • •
Neuflize OBC (€ 22.0 bn) UBS (€ 10.0 bn) La Compagnie Financière Edmond de Rothschild (€ 9.6 bn) Rothschild & Cie (€ 6.1 bn) Crédit Suisse (€ 4.5 bn) KBL (€ 3.0 bn) Lazard Frères Gestion (€ 5.5 bn) Martin Maurel (€ 4.0 bn)
• • • •
BNPP (€ 66.0 bn) Société Générale (€ 16.0 bn) HSBC (€ 14.7 bn) Barclays (€ 8.6 bn)
Market share 2011 in Private Banking (in % of AuM)
3% 18%
35%
45%
47% 20% 32%
Saving and union banks
• • • •
Crédit Agricole (€ 91.0 bn) Caisses d‘Epargne (€ 45.0 bn) LCL (€ 35.0 bn) La Banque Postale (€ 14.0 bn)
Insurance companies
• •
Axa GP (€ 7.0 bn) SwissLife (€ 2.8 bn)
Private Banking Study 2012 EUROGROUP CONSULTING / Page 54 of 96
Source: EGC Research
Private Banks
Savings and union banks
Commercial banks
Insurance companies
The financial crisis had a strong impact on French Private Banking margins, mildly compensated by efforts on cost cutting
Key performance ratios for the French Private Banking market
French Private Banking market
Key findings
Development (2009 - 2010)
2009
2010
Adjusted gross margin on AuM (in bps)
74
67
-10%
Total revenue per employee (in k€)
388
382
-2%
Personnel costs per employee (in k€)
129
125
-3%
Cost-income-ratio (before depreciation)
66%
65%
-1%
Gross profit per employee (in k€)
151
142
-6%
Private Banking Study 2012 EUROGROUP CONSULTING / Page 55 of 96
Source: University of Zurich, The International Private Banking Study 2011
• While market recovery is under way, client behavior have led private banking in France to pursue growth on products with less leverage in terms of profitability. Fear of discretionary management has hindered overall volumes and margin. • To compensate the relative weakness in product offering and lack of profitability, a strong effort was put on cost cutting and synergies at operations level thus maintaining a flat or slightly positive CIR • Clear objectives for wealth management actors on the French market will be to develop business on new clients and foster revenues through increased distribution of high margin products and services such as portfolio advisory
Product and service offerings – analysis of products and services in national markets and the different business models
Banking provider
Threshold (€k)1
Description of business models
Private banks and investment managers
WM
• • • • •
Commercial banks
PB WM
Savings and union banks
PB
Insurance companies
PB
WM
Private Banking Study 2012 EUROGROUP CONSULTING / Page 56 of 96
1,000
230 1,500
230 1,500
250 - 1,000
Specialised in investment management Well known reputation and know-how in the field of wealth management Independence in terms of solutions and products Tight link between investment banks – small-mid-cap Entrepreneurs sourcing
• Full products scope, including financial and non financial tools • Important client base • Too big to fail
• Huge client base • Diversified products
• Too big to fail client expectation • Important client base • Know-how in the field of wealth management
1) Extract/samples Legend: PB = Private Banking; WM = Wealth Management; FO = Family Office
Product and service offers have been a tactical mean towards a competitive edge but is too streamlined to require strategic orientation
Standard services
Value-added services Value Added Services
Specialties
• Conventional and standard private banking products (accounts, cards, debit)
• Individualised investment management (discretionary portfolio management)
• Tax management
• Holistic financial and wealth planning
• Family office (partial and fully fledged services)
• Investment management
• Complex financial engineering
• Cash flow management
• Asset planning
• Risk management and reporting
• Trust administration and management
• Depository services
• Research services
• Inheritance services
• Financial engineering
• Customised wealth reporting
• Art advisory • Real estate
Standard product and service chain Customised products and services
Product and service focus by banking provider
• • •
Savings and union banks Private banks/investment managers Commercial banks
Private Banking Study 2012 EUROGROUP CONSULTING / Page 57 of 96
• • •
Private banks/investment managers Commercial banks Savings/union banks (limited scope)
• •
Private banks (limited scope) Commercial banks
The crisis forces the banking providers to be more creative and suggest offers more distant to traditional financial core business
Advisory mandates and services
• Clients’ appetite for financial offers has strongly evolved with the financial crisis: aversion to risk prevails on profitability seeking while constituting any allocation • Products such as alternative management, hedge funds and structured products have suffered either from their risky feature or from their complexity. Those complex products, used to be the more profitable for establishments • Certain actors are investing the complementary parts of service offering • While developing offers around safe havens: real estate, art market, gold • While investing new fields, such as foresight and protection, via an extension of the bank assurance model to the world of private banking clients • While assisting clients in their wish to devote their asset to activities of public interest and to implement philanthropic initiatives • This type of offer, although generating smaller volumes, is addressing a demand of clients and therefore is a growth driver, partially compensating revenue losses related to the evolution of allocation
„Winnerproducts“ in 2011
• Despite a decelerating trend on life insurance products, the distribution of such fiscal attractive support remains wealth management success story for 2011
• Diversity in asset class and open source via multi-class/multi-manager funds has known a great success with over 15% increase in such products in wealth management portfolios • Covered bonds and covered warrants in portfolio management strategies have known an interesting positive trend which remains to be confirmed in the long run
Private Banking Study 2012 EUROGROUP CONSULTING / Page 58 of 96
French Private Banking market is still in tough circumstances but should be able to provide interesting growth opportunities
Dimension
Trends 2011 - 2012
Effect
Market
• • •
On Wealth managmeent segment, the market volume will not significantly increase On Private banking and affluent clients, market maturity is not fully achieved New challenges (debt crisis, risk of inflation, currency fluctuations…)
Asset under Management
Competition
• •
Cut-throat competition between commercial banks and investment managers. Increased competition on mass affluent segment, e.g. financial networks (savings and union banks) Lack of differentiation on product offering with streamlined offer
• Regulation/ Supervision
Profitability
Customers
• • •
Strong impact of market regulation and market trends in the near future High transparency/documentation requirements for advisory process Progressive implementation of regulation with high effort required on IT and operations to fulfill requirements
• • •
Cost containment and consolidation efforts paid-off for commercials Retention/seeking of high skilled staff with high impact on RTB costs Risk on profitability to cover requirements from regulation
•
A sustained loss of clients’ confidence and frustration about the performance with impact on high margin products Risk aversion as “mega trend” fear of inflation as driver Search for added value services with marginal or negative margins for banks
• •
Private Banking Study 2012 EUROGROUP CONSULTING / Page 59 of 96
Profit
Cost Income Ratio
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
on How to Master the Challenges
•
Increasing Income vs. Reducing Costs
EUROGROUP CONSULTING Market
•
Detailed Analysis of Selected Countries
3.
4.
EUROGROUP CONSULTING Best Practices
Expertise on Private Banking in Europe i. ii. iii. iv. v.
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 60 of 96
•
The Austrian Private Banking Market The French Private Banking Market The German Private Banking Market The Italian Private Banking Market The Swedish Private Banking Market
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
Germany’s Private Banking market faces tough conditions and confronts participants with substantial challenges
In German Private Banking, the tough economic conditions of the past years led to continuously deteriorating margins and left its marks on the financial statements of Private Banking providers. The Private Banking units of commercial banks make up the largest market share with 45%. The second largest segment is represented by savings and union banks with 35%, followed by private banks, investment managers, independent financial advisors and family offices accounting in total for 20% of market share. An analysis of products and services in the German market identifies substantial differences between the business models of the different categories of Private Banking providers. Commercial banks offer the widest product and service range, but they lack a real unique selling proposition and to a certain extend suffer from unclear distinctions in their product strategy. An examination of the latest trends in products and services shows several successful strategic approaches. Advisory mandates increased by 11% in 2010 and this trend is even accelerated by regulatory efforts regarding independent advisory services. Real estate investments with significant demand due to inflation fears. Experts predict a strong recovery throughout all German Private Banking client segments within the next three years – and Private Banking providers and clients are both looking forward to that.
Private Banking Study 2012 EUROGROUP CONSULTING / Page 61 of 96
Private banking business in Germany is to be differentiated into four segments starting from € 300,000
Asset bands
Client segment
>€ 2 mn
€ 1 - € 2 mn
€ 0.5 - € 1 mn
€ 0.3 - € 0.5 mn
# Individuals (2011) Banking sector
Very High Net Worth Individuals
~42,000
Family Office Wealth Management
High Net Worth Individuals
~75,000
Wealth Management Private Banking
Affluent Individuals
~186,000
Private Banking
Mass Affluent Individuals
~391,000
Private Banking/Retail Banking
• Described asset bands and client segmentation represent a common way for German private banks to cluster its client target groups. Nevertheless, within the banking sector plenty of different asset band models are in use. Thus, a comparability of competitors is limited, e.g. in case of share of wallet analyses • (Mass-) affluent clients (i.e. those with less than € 1.0 mn in liquid assets) are predominately served by savings and union banks and commercial banks. Ultra and High Net Worth Individuals are typically the preserve of the private banks and wealth management units of wholesale banks; with investment managers accounting for a small proportion of this market • However, banks do not tend to state a minimum threshold for inclusion within their services Private Banking Study 2012 EUROGROUP CONSULTING / Page 62 of 96
Source: Datamonitor: Wealth Management in Germany 2011
Within the next three years experts expect a strong recovery within German Private Banking client segments
Development of client target groups in Germany Number of affluent individuals/HNWIs/UHNWIs (in ‘000) 700 40 600
72
39 71
38 69
500 185 400
175
179
41
42
75
75
186
186
45
46
78
80
Development of liquid assets by asset band
82
365
346
700 600
192
194
199
500
362
385
391
409
416
434
100
267
276
291
223
232
96
100
101
104
96
94
90
92
200
128
126
131
132
137
139
143
122
137
130
136
144
146
153
155
161
2007
2008
2009
2010
2011
2012e
2013e
2014e
100 0 2007
2008
2009
€ 0.3 - € 0.5 mn
•
252
300
0
•
235
249
400
300 200
€ bn
48
2010 € 0.5 - € 1 mn
2011
2012e
€ 1 - € 2 mn
2013e
2014e
In 2010 there were about 257,000 individuals with more than € 500,000 in assets in Germany. This is 23,000 less affluent individuals than four years ago. However, Germany‘s affluent population is currently about to recover, as Germany’s economy is on the rebound Expert estimations state that already by 2014 Germany will show about 340,000 individuals with more than € 500,000 onshore assets, which translates to a CAGR of 7.2% from 2010 - 2014
Private Banking Study 2012 EUROGROUP CONSULTING / Page 63 of 96
€ 0.3 - € 0.5 mn
> € 2 mn
€ 0.5 - € 1 mn
€ 1 - € 2 mn
> € 2 mn
•
By the end of 2010 Germany’s client target groups had € 334 bn in onshore liquid assets, € 29 bn less than in 2007
•
However, as the German economic conditions are expected back on recovery (economic growth, good employment rates, etc.), assets/ investments of Germany’s affluent population are increasing as well
•
As a result, experts predict that liquid assets will record a CAGR of 6.9% until 2014, reaching a value of almost € 450 bn by 2014
Source: Datamonitor: Wealth Management in Germany 2011
German onshore private banking is categorised in three major sectors among which commercial banks hold largest AuM market share
Private Banking sector
Institutions (extract)
Commercial banks
•
Savings and union banks (incl. local banks)
Private banks, investment managers, independent financial advisors and family offices
• • • • •
Deutsche Bank/Sal.Oppenheim (12.0%) Commerzbank (8.0%) HVB/Unicredit (6.0%) UBS (3.5%) Credit Suisse (3.0%) HSBC Trinkhaus & Burkhardt 3.0%)
• • • • • •
Hamburger Sparkasse (1.0%) Bremer Landesbank (0.7%) Landesbank Berlin LB Baden-Württemberg DZ Bank (2.0%) Local savings and union banks
• • • • • • • •
M.M. Warburg (1.3%) Berenberg Bank (1.2%) Bankhaus Lampe (0.8%) Bankhaus Metzler (0.7%) Flossbach & von Storch Feri Family Trust CEROS Vermögensverwaltung VMZ
Private Banking Study 2012 EUROGROUP CONSULTING / Page 64 of 96
Market share 2011 in Private Banking (in % of AuM)
20%
45%
35%
45%
20%
35%
Private Banks
Savings and union banks
1) This sector comprises Private Banking units of German wholesale banks (35%) and of foreign commercial banks (10%) Source: Investors Marketing 2010; EGC Research
Commercial banks
Tough economic conditions led to continuously deteriorating margins and left marks on Private Banking financial statements
Key performance ratios for the German Private Banking market
Key findings • Even though market recovery is already under way, profitability ratios such as adjusted gross margin declined again in 2010
German Private Banking market
Development (2009 - 2010)
2009
2010
Adjusted gross margin on AuM (in bps)
68
65
-4%
Total revenue per employee (in k€)
226
215
-5%
Personnel costs per employee (in k€)
122
111
-9%
Cost-income-ratio (before depreciation)
75%
77%
+2%
69
61
-11%
Gross profit per employee (in k€)
Private Banking Study 2012 EUROGROUP CONSULTING / Page 65 of 96
Source: University of Zurich, The International Private Banking Study 2011
• Private Banking revenues have suffered from declining margins as volume in profitable business dwindles and tightening regulatory rules as well as increasingly demanding clients are challenging banks • Being a human capital intense business, Wealth Management is confronted with substantial personnel expenses that account for the major portion of total costs • Although personnel expenses sunk by 9% the overall cost reductions could not offset the decline in revenue and are still threatening banks’ efficiency (increase of 2% in the national average CIR)
An analysis of products and services in the German market identifies substantial differences between the business models and their offerings
Banking provider
Threshold (€k)1
Description of business models
Corporate (foreign) banks
PB
• Innovative products (investment banking), large expertise of client and product managers
Savings and union banks
200
WM
1,000
FO
20,000
PB
125
• Worldwide presence and too big to fail client expectation
• Solid performance of Private Banking mainstream products and services • High density branch network • High client potential, high cross-selling rate (retail to Private Banking)
Private banks
PB WM
500 5,000
• Specialised Private Banking products • High customer retention through personalised advisory, key account mentality and branding factor • Tradition as strong USP/binding factor
Investment manager/ financial advisors
PB
250
• Long-term product experience; specialised investment skills • Label-Independent product offering • Quick time-to-market reaction
Family offices
FO
5,000
• Specialised investment management approach for family assets • One-stop services • Open product platform
Private Banking Study 2012 EUROGROUP CONSULTING / Page 66 of 96
1) Extract/samples Legend: PB = Private Banking; WM = Wealth Management; FO = Family Office
Commercial banks offer widest product and service range but lack unique selling proposition and suffer from non-differentiating product strategies
Standard services
Value-added services Value Added Services
Specialties
• Conventional and standard Private Banking products (accounts, cards, debit)
• Individualised investment management (discretionary portfolio management)
• Family office (partial and full fledged services)
• Holistic financial- and wealth planning
• Trust administration and management
• Investment management
• Currency management
• Inheritance services
• Asset planning
• Financial engineering
• Art advisory
• Real-estate advisory
• Risk management and reporting
• Depository services
• Tax management
• Numismatic- and stamp collection advisory
• Research services
• Customised wealth reporting Standard products and services Customised products and services
Product and service focus by banking provider
• • •
Savings and union banks Private banks/inv. managers/fam. off. Commercial banks
Private Banking Study 2012 EUROGROUP CONSULTING / Page 67 of 96
• • •
Private banks/inv. managers/fam. off. Commercial banks Savings and union banks (ltd. scope)
• • •
Family offices/trust managers Private banks (limited scope) Commercial banks
An examination of the latest trends in products and services shows several successful strategic approaches
Advisory mandates & services
• Advisory mandates increased by 11% in 2010. Recent regulatory efforts regarding independent advisory services accelerate this trend (affluent individuals/ HNWI) • Discretionary or execution-only services are currently less demanded (affluent individuals) • Real-estate investments with significant demand due to inflation fears (affluent individuals) • Inheritance services are getting more and more popular (UHNWI) • Constantly rising demand to set-up single-family offices (UHNWI)
„Winnerproducts“ in 2011
• Multi-manager funds – actually embedded in 25% of German clients’ portfolios • Multi-asset class funds – growth rate of approximately 16% (yoy) • Exchange traded funds – growth rate of 4% (yoy) due to cheaper brokerage fees – trend continues
Private Banking Study 2012 EUROGROUP CONSULTING / Page 68 of 96
Germany’s Private Banking market still faces tough conditions in combination with a challenging market environment
Dimension
Trends 2011 - 2012
Effect
Market
• • •
The market volume will not increase significantly – cut-throat competition New challenges (debt crisis, risk of inflation, currency fluctuations, etc.) Higher investment universe, more transparency in investments
Asset under Management
Competition
• • •
Independent asset managers gain market share Increased competition, e.g. financial networks (savings and union banks) „Home-grown“ problems of individuals offer possibilities Profit
Regulation/ Supervision
Profitability
Customers
• • •
Increased repatriation and enhanced onshore-offers High transparency/documentation requirements for advisory process Stronger regulation on product (manager) level
• • • •
Revenue margins remained flat at 83bps1. (lower-risk asset class investments) Cost containment and consolidation efforts paid-off for commercial banks Private and smaller banks still struggle with their CIR (~85%) Retention/seeking of high skilled staff with high impact on RTB-costs
• • • •
A sustained loss of clients’ confidence and frustration about performance Willingness to change bank increased Risk aversion as “mega trend”, fear of inflation as driver Willingness to pay for accomplished performance still exists
Private Banking Study 2012 EUROGROUP CONSULTING / Page 69 of 96
1) 2010 (yoy); 100bps at the peak in 2007
Cost Income Ratio
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
on How to Master the Challenges
•
Increasing Income vs. Reducing Costs
EUROGROUP CONSULTING Market
•
Detailed Analysis of Selected Countries
3.
4.
EUROGROUP CONSULTING Best Practices
Expertise on Private Banking in Europe i. ii. iii. iv. v.
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 70 of 96
•
The Austrian Private Banking Market The French Private Banking Market The German Private Banking Market The Italian Private Banking Market The Swedish Private Banking Market
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
Italian investors are traditionally risk averse and the recent recession stressed the lack of confidence and trust in the market
The Italian economy was significantly affected by the global recession and Italy is still a fragile economy with consistent macroeconomic issues, and a stock market that has seen its share of Western Europe market capitalisation diminish in recent years. Wealth Management investors in Italy have historically been cautious with low risk appetite: in fact, their portfolios consist mainly of cash or near cash items and/or fixed income assets. Nonetheless, permanently low interest rates and rising inflation are set to boost HNW Investors’ appetite for risk, and demand for discretionary asset management and financial planning is set to increase. It is expected that assets held by HNW Individuals shall return to pre-crisis levels by 2014. Despite the fact that at the end of 2010 wealth invested in Private Banking amounted to € 896 bn (the highest level ever reached – of which approximately € 100 bn were assets repatriated from offshore thanks to the “Tax Amnesty” legislation of 2009), restoring WM to pre-recession levels, 2011 reported hints of decline. As well as the economic factors, Italian Wealth Management struggles to take off because the product range provided is below the European average: Italian investors’ portfolios are quite simple in their composition. The difficult time period at the moment makes liquid assets more preferred investments. Private Banking services in Italy are offered mainly by large savings and union banks but many international (specialised) operators are expanding their presence in the market although they still play a secondary role. It is noteworthy to underline the fact that Italian investors are extremely loyal to their asset managers rather than to the company itself. Private Banking Study 2012 EUROGROUP CONSULTING / Page 71 of 96
High net worth individuals are considered to be the most important segment due to the fact of engaging half of the market in AuM
Asset bands
Client segment
>€ 2 mn
€ 1 - € 2 mn
€ 0.5 - € 1 mn
€ 0.3 - € 0.5 mn
# Individuals (2011) Banking sector
Very High Net Worth Individuals
~31,000
Family Office/Private Banking/Wealth Mngt
High Net Worth Individuals
~71,000
Wealth Management Private/Retail Banking
Affluent Individuals
~166,000
Private/Retail Banking
Mass Affluent Individuals
~292,000
Retail Banking
• (Mass-) affluent clients (i.e. those with less than € 1.0 mn in liquid assets) are predominately served by Commercial Banks. Ultra and High Net Worth Individuals are typically looked after by Private Banks and wealth management or by the relative division of Universal Banks (which largely dominate the Italian market). The independent investment managers play a secondary role in Italy • In 2011 there has been a diminished interest in financial markets, whereas it emerged an increasing inclination towards stores of values (such as real estate, commodities and currencies). This phenomenon is related to the rising customers’ lack of confidence in financial entities which are deemed as not effective in proposing concrete tailored solutions to the clients’ needs (personal financial planning) Private Banking Study 2012 EUROGROUP CONSULTING / Page 72 of 96
Source: Datamonitor: Wealth Management in Italy 2011
After the recession of 2008 - 2009, a steady growth is experienced following three years, reaching higher results than pre-crisis
Development of client target groups in Italy
Development of liquid assets by asset band
Number of affluent individuals/HNWIs/UHNWIs (in ‘000) 600 40 500
71
36
39
40
40
70
72
71
in € bn
42
44
74
76
45
600
78 500
66 400
173 158
167
169
166
171
173
176
300
234
200 287
262
284
294
292
305
312
322
100
91
94
96
98
230
93
91
93
86
119
117
119
118
122
124
127
110
108
98
107
110
109
114
116
120
2007
2008
2009
2010
2011
2012e
2013e
2014e
100
2007
2008
2009
€ 0.3 - € 0.5 mn
•
274
200
0
•
262
239
214
400 300
253
241
2010 € 0.5 - € 1 mn
2011
2012e
€ 1 - € 2 mn
2013e > € 2 mn
Despite the economic recession that struck Italy in 2008, 2009 started to show steady recovery signs: the number of affluent individuals increased of 7% yoy. This upward-sloping trend is confirmed also in 2010 and it will eventually outperform the pre-crisis level HNW and UHNW individuals were affected by the financial crisis as well. Nonetheless, these asset bands further confirm the recovery trend that will characterise the upcoming years with an CAGR of approx. 3%
Private Banking Study 2012 EUROGROUP CONSULTING / Page 73 of 96
0
2014e
€ 0.3 - € 0.5 mn
• •
•
€ 0.5 - € 1 mn
€ 1 - € 2 mn
> € 2 mn
By the end of 2010 Italy’s client target groups had € 563 bn in onshore liquid assets, € 8 bn more than in 2007 Liquidity asset bands report trends highly coherent to those of the target groups: after a plunge in 2008 due to recession, 2010 marks the beginning of the recovery. As outlined for the individuals, also the liquid assets should return to pre-crisis level in the upcoming years In line with what above, the total liquid assets in 2014 are expected to reach approximately € 620 bn with a CAGR 2010 - 2014 of 2.4%
Source: Datamonitor: Wealth Management in Italy 2011
Italy’s Private Banking is largely dominated by the Commercial Banks
Private Banking sector
Institutions (extract)
Insurance companies
• • •
Allianz (4%) AXA (3%) Generali (15%)
• • • • • •
BNP Paribas – BNL (3%) Gruppo Banco Popolare (2%) Intesa San Paolo (20%) Mediolanum (3%) UBI Banca (3%) UniCredit (12%)
Private banks, investment managers, independent financial advisors and family offices
• • • • • •
AM Holding (4%) Amundi (3%) Arca (2%) Azimut (2%) Credit Suisse (2%) Franklin Templeton (2%)
Other groups
• Other Groups (20%)
Commercial banks (incl. local banks)
Private Banking Study 2012 EUROGROUP CONSULTING / Page 74 of 96
Source: EGC Research
Market share 2011 in Private Banking (in % of AuM)
15% 20%
35%
22%
45%
20% 43%
Private banks
Commercial banks
Insurance companies
Other groups
Italy has been one of the few countries able to cut costs and increase gross margin
Key performance ratios for the Italian Private Banking market
Italian Private Banking market
Adjusted gross margin on AuM (in bps)
2009
2010
68
74
Key findings
Development (2009 - 2010)
+9%
Total revenue per employee (in k€)
266
247
-7%
Personnel costs per employee (in k€)
103
95
-8%
Cost-income-ratio (before depreciation)
65%
64%
-2%
Gross profit per employee (in k€)
Private Banking Study 2012 EUROGROUP CONSULTING / Page 75 of 96
92
78
-15%
Source: University of Zurich, The International Private Banking Study 2011
• After the 2008 recession, in 2010 there has been a global trend of recovery. However, the wealth management sector still faced decreased gross profit and shrinking volumes, further hampered by the inability of banks to significantly cut cost as reaction to declining revenues
• Italy is one of the few countries that has reported profitability, leading to a better efficiency proven by the decreased CIR • Wealth management is a human-capital intense business where personnel costs account for a major portion of costs
• Although Italy accomplished positive gross margin on AuM and diminished personnel costs, it could not avoid the general EU trend of plummeting revenues and gross profits
Product and service offering: analysis of the major business models serving Private Banking needs in Italy
Type of bank
Threshold (€k)1
Description of the business models
Local commercial banks and insurance companies
PB
• Cross-selling opportunities (between Retail and Private Banking)
Commercial banks
PB
500
• Dedicated products/services
WM
500 1,000
• High density branch network • Wide range of products, both Retail and Private (lot of Commercial Banks have their own AM and/or PB divisions) • Specialised products/services
Private banks, investment managers, independent financial advisors, family offices and other groups
PB
500
WM
1,000
FO
5,000
• Increasing presence in Italy of foreign players, backed by a strong international bank in the background, in order to avail of the importance of the personal relationship with the client • Individual advisory and significant use of third party products completing the existing offering of own instruments/services • Tailored services to cover client’s financial/non-financial assets and specialisation on families
Private Banking Study 2012 EUROGROUP CONSULTING / Page 76 of 96
1) Extract/samples Legend: PB = Private Banking; WM = Wealth Management; FO = Family Office
Commercial banks dominate the Italian Private Banking market, except for customised products that are provided by specialised entities
Standard services
Value-added services Value Added Services
Specialties
• Conventional and standard Private Banking products (accounts, specifically targeted credit cards)
• Individualised investment management (discretionary portfolio management)
• Family office
• Tax and financial planning
• Investment management
• Inheritance planning
• Fiscal advisory
• Depository services
• Art advisory
• Research services
• Real estate advisory
• Customised wealth reporting
• Specific advisory services
• Loans and mortgages
• Trust administration and management
• Off-the-shelf packages for highest asset band customers
Standard products and services Customised products and services
Product and service focus by banking provider
• • •
Local commercial banks/insurances Commercial banks Private banks/IMs/IFAs/FOs/others
Private Banking Study 2012 EUROGROUP CONSULTING / Page 77 of 96
• • •
Private banks/IMs/IFAs/FOs/others Commercial banks Local commercial banks/insurances
• • •
Family offices/trust managers Private banks/wealth managers Commercial banks (limited scope)
There is a rising demand in terms of tax and fiscal advisory, and there is no prediction of innovative Private Banking products in the Italian market
Advisory mandates & services
• Increasing demand for tax and inheritance planning, considering also that most of the wealth of the Italian customer derives from inheritances and entrepreneurship • Limited Real Estate investments/advisory • No relevant changes are expected in the Italian HNW individuals’ portfolio composition • Personal loans and mortgages are offered in limited quantities, mostly because Italian individuals invest in such products with property-related investments • Limited investment in commodities (below European average rate) • HNW Investors allocate a significant proportion of their wealth into fixed income assets with a percentile figure of 39.5% which is second in Europe behind only the Netherlands • Hosting events is regarded to be the most successful way to attract new clients and consolidate the existing ones
"Winnerproducts" in 2011
• Corporate and Government Bonds account for ~36% of Italian private banking portfolios • Financial and Tax planning – customers increasingly demand for this type of advisory • Collective Investment Schemes – mostly fixed income products
• Growing interest on Insurance-Financial products
Private Banking Study 2012 EUROGROUP CONSULTING / Page 78 of 96
Current market condition – the key threat for Italian Private Banking providers is the same as in the rest of Europe: lacking profitability
Dimension
Trends 2011 - 2012
Effects
Market
• •
Asset under Management
•
Competition
• •
Regulation/ Supervision
Profitability
Customers
• •
Italy’s economy is set to remain stagnant in 2011 - 2012 The Italian stock market has seen a constant decline in the share of overall Western Europe market capitalisation Given the aforementioned constraints, market volume will not see any significant increases Italian wealth management market is dominated by large Commercial Banks – which tend to have their own asset management/private banking divisions Independent private banks, asset managers and international wealth managers are expanding their presence in Italy, considering also the Italian cultural facet in which the client highly regards the personal relationship with the wealth manager Significant repatriation of offshore assets (~ € 100 bn) following the “Tax Amnesty” legislation of 2009 Reform of the Financial Advisory sector – two different register for IFAs and financial “promoters”
• • •
Despite the cost containment efforts, profitability is still negative Italian banking market is highly fragmented, but consolidation of many entities is in progress Seeking of wealth managers who could provide the client with diversified products in order to increase the portfolio’s returns
•
Risk averse customers with an orientation towards “wealth-preservation” rather than wealth creation – although low interest rates and rising inflation are set to boost their appetite for risk Italian customers are reluctant to invest in diversified investment products and prefer to opt for cash or near cash solutions
•
Profit
Private Banking Study 2012 EUROGROUP CONSULTING / Page 79 of 96
Cost Income Ratio
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
EUROGROUP CONSULTING Best Practices
•
Increasing Income vs. Reducing Costs
•
Detailed Analysis of Selected Countries
3.
on How to Master the Challenges
4.
EUROGROUP CONSULTING Market
Expertise on Private Banking in Europe i. ii. iii. iv. v.
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 80 of 96
•
The Austrian Private Banking Market The French Private Banking Market The German Private Banking Market The Italian Private Banking Market The Swedish Private Banking Market
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
Swedish Private Banking faces a continued uncertainty and decreasing profitability but a growing market
The uncertainty in the global economy has increased and the situation in several European countries has worsened. The development means that banks' liquidity risk to remain a focus. Meanwhile, Swedish banks have so far done better than many European banks due to strong capitalisation and the strong public finances of Sweden.
The ongoing financial turmoil shows that banks and government agencies continue to be prepared to deal with an uncertain situation. Profitability is decreasing due to regulatory pressure increased competition, and client behaviour; customers purchase less, reduce investments, and are less risk prone. The Asset under Management (AuM) in Sweden has had a positive growth rate since the crises in 2008. The only decrease in AuM is identified between 2007 - 2008 as a result of the 2008 crises. Research show that Swedish Private Banking providers believe a growth rate of about 4 6% over the coming years is expected. Particularly onshore investments are increasing since many wealthy Swedes move their fortunes back home, especially now when the tax authority is more “forgiving”. This growing market in Sweden suffers from the following challenges; profitability, strengthened competition, and finding as well as retaining talent.
Private Banking Study 2012 EUROGROUP CONSULTING / Page 81 of 96
Private banking business comprises the private banking clients, HNWI and UHNWI client segments (starting at € 300,000)
Asset bands
Client segment
>€ 2 mn
€ 1 - € 2 mn
€ 0.5 - € 1 mn
€ 0.3 - € 0.5 mn
# Individuals (2011) Banking sector
Very High Net Worth Individuals
~5,000
Family Office Wealth Management
High Net Worth Individuals
~8,000
Wealth Management Private Banking
Affluent Individuals
~21,000
Private Banking
Mass Affluent Individuals
~4,000
Retail Banking
• Described asset bands and segmentation approach represents a common way for Swedish private banks to cluster their client target groups. Nevertheless, within the banking sector various of different asset band models are in usage. Thus, a comparability of competitors is limited, e.g. in case of share of wallet analyses • Banks tend to state a minimum threshold, generally from € 200,000, for inclusion of their services • The complete span of higher income individuals (> € 50,000) is estimated to approximately 1,089,000
Private Banking Study 2012 EUROGROUP CONSULTING / Page 82 of 96
Source: Datamonitor Western European Wealth Markets Database 2011
Within the next two years experts expect a reinforcement of the current growing trend in the high net worth population
Development of client target groups in Sweden 100
Development of liquid assets by asset band
Number of affluent individuals/HNWIs/UHNWIs (in ‘000)
100
90 80 70 60 50
4 8
4 8
4 7
5 9 21
20
20
5 8
5 9 22
5 9
6 10
22
21
80
60 50
12
12
12
15
16
16
17
16
16
17
18
18
2010
2011
2012e
2013e
2014e
11
11
14
15
13
15
2008
2009
22 30
40
32
28
26
26
40
34
44
43
47
47
50 20
10
10
0
10
10
9 14 15
12
34
31
29
40
30 20
90
70 23
17
40
€bn
0 2007
2008
2009
€ 0.3 - € 0.5 mn
2010 € 0.5 - € 1 mn
2011
2012e
€ 1 - € 2 mn
2013e
2014e
2007
€ 0.3 - € 0.5 mn
> € 2 mn
€ 0.5 - € 1 mn
€ 1 - € 2 mn
> € 2 mn
•
Swedish high net worth individuals growth went through a slower phase during 2008/2009 due to the economic and financial crisis
•
The decrease of liquid assets in Sweden between 2006 - 2008 has shown a healthy, although slower growth after a period of recession
•
The number of private banking customers is at the moment estimated to approximately 80,000 individuals
•
During the years 2007 - 2014 it is estimated that there will be an increase of CAGR with 4.5%
•
Generally the Nordic HNWI is > 50 year, though the younger segment is growing due to the high entrepreneurial milieu in Sweden
•
Due to tax amnesty from the Swedish government, many HNWIs have taken the opportunity to repatriate their assets from abroad
Private Banking Study 2012 EUROGROUP CONSULTING / Page 83 of 96
Source: Datamonitor Western European Wealth Markets Database 2011
Swedish onshore private banking players are categorised in three major sectors, of which commercial banks has the biggest AuM market share
PB sector
Institution (extract)
Commercial banks
• • • • •
SEB Nordea Swedbank Handelsbanken Danske Bank
Private banks
• • • • • • • •
Carnegie Penser Burenstam & Partners Quesada Söderbergs & Partners Valbay Lancelot …
Other, internet banks
• • •
Nordnet Skandia Banken Avanza
Market share 2011 in Private Banking (in % of AuM)
5%
10%
87% Private Banks
Private Banking Study 2012 EUROGROUP CONSULTING / Page 84 of 96
Commercial banks
Other, internet banks
There are remarkable differences between the business models of commercial bank, private banks and others
Business models
Threshold (€k)1
Description of the business models
Commercial banks
SEB
550
• North European presence
Nordea
270
• Solid performance of PB mainstream products and services
Swedbank
220
• High client potential, high cross-selling rate (retail to private banking)
SHB
1100
• Traditional banks with biggest market share
Danske Bank 1100
Private banks
Carnegie
1100
Penser
1100
Burenstam & Partners 1100 Söderbergs & Partners 330
Other and internet banks
• Innovative products (investment banking), large expertise of client and product manager • Specialised private banking products
• High customer retention through personalised advisory, key account mentality and branding factor • Long-term product experience; specialised investment skills
Nordnet
220
• Label independent product offerings
Skandia
330
• Quick time-to-market reaction
Avanza
330
• Focusing on younger HNWI clients • Providing the platform for trading and banking but letting customers do the work
Private Banking Study 2012 EUROGROUP CONSULTING / Page 85 of 96
1) Extract/samples
While standard products and services are offered by all market players, internet banks lack an offering of specialised products and services
Standard services
Value Added Services Value added services
Specialties
• Conventional and standard private banking products (accounts, cards, debit)
• Individualised investment management (discretionary portfolio management)
• Tax management
• Holistic financial- and wealth planning
• Investment management
• Trust administration and management
• Complex financial engineering
• Asset planning
• Inheritance services
• Risk management and -reporting
• Depository services
• Art advisory
• Research services
• Financial engineering
• Real estate
• Customised wealth reporting
• Family office (partial and fully fledged services)
• Real-estate advisory
• Cash flow management
Standard products and services Customised products and services
Product and service focus by banking sector
•
All market players
• • •
Private Banking Study 2012 EUROGROUP CONSULTING / Page 86 of 96
Private banks, family offices and investment managers Internet banks Commercial banks
• • • •
Private banks (limited scope) Corporate (foreign) banks Family offices and trust managers Commercial banks
Innovative products and services proved to meet the needs of different client segments
Advisory mandates & services
• Private banks with local presence, strong brand and financial stability have a competitive advantage. • Challenge to maintain client satisfaction during a crisis, but necessary
• Transparency of products and solutions is becoming a hygiene factor • E-trading is increasing, especially amongst younger HNWI’s and “new money” • Net new assets mainly increase from clients` invested share of wallet revenues rather then new investments • Actually, acquiring new (U-)HNWI customers means to capture them from competitors • Discretionary or execution-only services are currently less demanded
"Winnerproducts" in 2011
• Solution oriented products – tailored to customer’s needs • Modern investment programs attract new volumes in Private Banking • Real estate and tailored innovative services • Open architecture; not only offering own internal products, but a broad product offering with a mix of internal and external products • Providing an e-trading platform with advisory services on top
Private Banking Study 2012 EUROGROUP CONSULTING / Page 87 of 96
Current market condition – the Swedish private banking market still under tough conditions and circumstances, but continues to grow
Dimension
Trends 2011 - 2012
Effect
Market
• • • •
The market volume will increase slightly Cut-throat competition between the niched and smaller banks New challenges (debt crisis, risk of inflation, currency fluctuations…) Turbulence and uncertainty in the Euro-region
Asset under Management
Competition
• • •
Independent asset managers gain market share Increased competition Resource challenges – difficult and expensive to find, retain and develop talent Profit
Regulation/ Supervision
Profitability
Customers
• • •
Increased repatriation and enhanced onshore-offers High transparency/documentation requirements Increasing and tougher regulatory requirements driving costs
• • •
Revenue margins decreased Private and smaller banks still struggle Retention/seeking of high skilled staff with high impact on costs
• • •
A sustained loss of client confidence and frustration about the performance Willingness to change bank increased Willingness to pay for accomplished performance still exist
Private Banking Study 2012 EUROGROUP CONSULTING / Page 88 of 96
Cost Income Ratio
Agenda
1. Management Summary
•
Pressure on Profitability Challenges Corporate Strategy of Private Banking Providers
2. Hypotheses on Current Challenges of the Private Banking Market
•
Desired Profitability is Difficult to Reach
EUROGROUP CONSULTING Best Practices
•
Increasing Income vs. Reducing Costs
•
Detailed Analysis of Selected Countries
•
An Independent Consulting Company with Qualified Knowledge and Considerable Expertise
3.
on How to Master the Challenges
4.
EUROGROUP CONSULTING Market
Expertise on Private Banking in Europe
5.
EUROGROUP CONSULTING at a Glance
Private Banking Study 2012 EUROGROUP CONSULTING / Page 89 of 96
EUROGROUP CONSULTING is a purposefully European, independent
consulting company and committed to change
We provide support to our international and national clients in their endeavours to tackle a wide array of business concerns and to fulfil their overall strategic ambitions.
We believe that people in organisations are capable of achieving far more than they think is possible. We believe that connecting hearts and minds of people is the distinctive factor in achieving lasting effect and “passionate” work environments. We believe that knowledge and experience is a necessity, but the connection with the human factor will make the difference. This is the Art of Mobilization. The Art of getting thorough grasp of our clients’ stakes, constantly adapting to their unique and local cultures anticipating the changes and challenges they are faced with: these are our strengths, what make us unique. This is also our unfailing commitment to our clients. Private Banking Study 2012 EUROGROUP CONSULTING / Page 90 of 96
Amsterdam, Barcelona, Brussels, Bucharest, Casablanca, Dubai, Dublin, Frankfurt, Istanbul, Lisbon, London, Luxemburg, Madrid, Milan, Paris, Rome, Stockholm, Stuttgart, Warsaw, Vienna, Zurich, New York, Toronto
EUROGROUP CONSULTING goes beyond mere implementation, ensuring
real success
We resolve complex issues dealing with: • Strategy • Cross-border Mergers, Outsourcing and Partnerships
• Operational and Process Excellence • Program Management • Human Resources & Organisational Transformation • Information Management • Regulation and Compliance • Risk Management • Corporate Governance • Sustainability & Innovation Where appropriate, we use shared approaches, tools and techniques. We have developed an expertise in managing cultural differences. Our teams are immediately operational to conduct cross-border assignments.
Private Banking Study 2012 EUROGROUP CONSULTING / Page 91 of 96
EUROGROUP CONSULTING has a broad coverage of clients in a variety
of sectors
Private Banking Study 2012 EUROGROUP CONSULTING / Page 92 of 96
• • • • • • • • • •
Retail Banking Corporate & Investment Banking Finance & Leasing Asset Management Private Banking & Wealth Management Securities Services Regulators & Market Infrastructures Insurance Payments & Cards Insurance
ABN-AMRO Bank, Açoreana, AGF, Allianz, Axa, Banca Popolare dell'Emilia Romagna, Banque de France, Banque du Luxembourg, Banque et Caisse d'Epargne de l'Etat du Luxembourg, Barclays, BES, BNP Paribas, BPI, Calyon, Clearstream, Commerzbank, Crédit Agricole, Société Générale, Dekabank, Deutsche Bank, Dexia, DZ Bank, Euroclear, Euronext, Gan, Generali, Groupama, HSBC, ING, Intesa San Paolo, La Banque Postale, La Caixa, La Mondiale, LBBW, LCHClearnet, Lloyds TSB, Marsh, Millenium BCP, Natixis, NORD/LB, Petercam Puilaetco, Dewaay, Rotschild & Cie, Santander, Sparkasse Leipzig, UBS, UniCredit Group, Winterthur, Zurich
• • •
Pharmaceutical Automotive Consumer goods & retail
• • • •
Energy Transport Telco Post
AKI, AkzoNobel, Arcelor Mittal, Areva, Astra Zeneca, Autobacs, Bongrain, Casino, Coopbox, Danone, DCNS, Faurecia, General Cable, Salumifici Italiani, Gruppo Industriale CCPL, Gruppo Italiano Vini, G-Star, Heineken, Italcarni, Jansen Cilag, Lafarge, Legrand, Lilly, Louwman, Manitou, Michelin, Nestlé, Nexance, Pentaplast, Pernod Ricard, Pfizer, PSA, Quick, Renault, Riunite – CIV, Roche, Secil, Siemens, Sigma Tau, SIVA, Sonae, Sony, Sothema, Syngenta, Teka, Unilever, Unipeg, Vallourec EDF, SNCF, RATP, Vodafone, Bouygues Immobilier, Abbot, Française de jeux, Endesa, Telecom Italia, Sanoma, Utigevers, Orange, TF1, EDP, La Poste, Abbott
• • • •
Central administration Local authorities Welfare Health institutions
Lyon General Hospital, Ministry of Defence, Ministry of Home Affairs, Ministry of Foreign Affairs, Ministry of Immigration, Ministry of Work, Ministry of Health, Ministry of Education, Ministry of Environmental Affairs, Paris General Hospital, The City of Paris, The Government of the Grand Duchy of Luxembourg, The Luxembourg Chamber of Commerce, The Paris Chamber of Commerce.
The references of EUROGROUP CONSULTING strengthen profound expertise in the European Private Banking industry (1/3) Examples/extract
Strategy
Mergers
Caisse d’Epargne – Gestion Privée (2011)
Brand positioning study and declension to the marketing mix components (front-office organisation, delivery channels, offering, client segmentation, etc.)
BNP Paribas Banque Privée (2011)
Repositioning of the external sourcing activity; definition of: sourcing channels, performance target per channel, implementation plan; training of the private bankers
HypoVereinsbank (2004)
Conceptualisation of a securities strategy; elaboration of recommendation for realisation; integration of subsidiary Vereins- and Westbank into product management of HypoVereinsbank
DnB NOR/NordLB/Bremer Landesbank (2007)
Evaluation of strategic options for different forms of international cooperations; assessment of potentials of international offshore markets as well as domestic markets of CEE-region and emerging countries
Lazard (2011)
Study of the potential market for HNWI client regarding financing offering
Banque Privée 1818 (2011)
Benchmark of private banking activities regarding the French market
HypoVereinsbank (2002 - 2003)
Merging and integrating the two private banks Bethmann and Maffei; realising synergy potentials; migration of different IT-architectures; strengthening of strategic positioning of HypoVereinsbank
Private Banking Study 2012 EUROGROUP CONSULTING / Page 93 of 96
The references of EUROGROUP CONSULTING strengthen profound expertise in the European Private Banking industry (2/3) Examples/extract
Mergers (continued)
LB Swiss/Frankfurter Bankgesellschaft (2010)
Merging the banking institutes LB Swiss and Frankfurter Bankgesellschaft; integrating activities of Helaba Trust; establishing new organisation and processes
Organisation
Constantia Privatbank (2007)
Definition of strategic goals and development of an appropriate an flexible organisation structure; conceptualisation of a new career model; implementation of organisation structure and career model
LB Swiss (2007 - 2008)
Strategic positioning in private banking and wealth management segments; implementation of a pre-defined corporate strategy into the organisational structure
UniCredit Group (2008)
Set-up of an COO-function of the divisions private banking and wealth management; elaboration of topics within a 3-year strategy planning process; development of a new target operating model
DekaBank Luxembourg (2006)
Optimisation of processes and structures in the field of standardised asset management; analysis of relevant market specifics, growth forecasts and client demand; improvement of quality with consistent ressources
Credit Suisse (2007)
Review of newly established processes of new branches in Vienna and Salzburg; development of process designs; implementation of processes and adaption to Austrian legal requirements
Crédit Agricole Banque Privée (2011)
Revision of offers from external partners and revision of each master agreement
Processes
Products and services
Private Banking Study 2012 EUROGROUP CONSULTING / Page 94 of 96
The references of EUROGROUP CONSULTING strengthen profound expertise in the European Private Banking industry (3/3) Examples/extract
Products and services (continued)
IT-Architecture
Rothschild (2011)
Definition of the products and services offers dedicated to the investment managers; budget planning and implementation plan
DekaBank Luxembourg (2011)
Conceptualisation and implementation of new processes for exchangetraded futures and options; connection to internal risk and reporting systems and to external brokers
Predica (2011)
Creation of a life-insurance offer dedicated to private banking activities
Bankhaus Lampe (2004)
IT-assessment and selection of a portfolio management system (RfPprocess with eight different vendors); process analysis of affected business processes; calculation of business case (total cost of ownership)
DekaBank Luxembourg (2011)
Selection of a portfolio management system (long-list and short-list compilation); IT-integration planning for data loading and connection to internal and external systems; project set-up for implementation phase
Spängler/IQAM (2010 - 2011)
Definition of target IT-infrastructure in preparation of the acquisition of the asset manager (IQAM) by the private bank (Spängler)
Private Banking Study 2012 EUROGROUP CONSULTING / Page 95 of 96
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Private Banking Study 2012 EUROGROUP CONSULTING / Page 96 of 96
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