Credit Suisse May Beat Asia Wealth Inflow Goal, Berchtold Says
Walter Berchtold, CEO of Credit Suisse Private Banking
Munshi Ahmed/Bloomberg
Walter Berchtold, chief executive officer of Credit Suisse Group AG's private banking business, speaking in an interview in Singapore.
Walter Berchtold, chief executive officer of Credit Suisse Group AG's private banking business, speaking in an interview in Singapore. Photographer: Munshi Ahmed/Bloomberg
Walter Berchtold, CEO of Credit Suisse Private Banking
Munshi Ahmed/Bloomberg
Walter Berchtold, chief executive officer of Credit Suisse Group AG's private banking business, in an interview in Singapore.
Walter Berchtold, chief executive officer of Credit Suisse Group AG's private banking business, in an interview in Singapore. Photographer: Munshi Ahmed/Bloomberg
Credit Suisse Group AG (CSGN) may exceed a 2012 target for asset inflows at its wealth business in Asia after an “encouraging” start to this year, the head of the company’s private bank said.
The Zurich-based bank said in September 2009 it’s targeting 35 billion Swiss francs ($38.9 billion) to 45 billion francs in net new client money in the Asia-Pacific region by 2012. The devastation caused by Japan’s strongest earthquake won’t derail inflows, said Walter Berchtold, chief executive officer of Credit Suisse’s private banking business.
“The region has a lot of growth, and growth in wealth management is coming predominantly outside of Japan,” Berchtold said in an interview in Singapore on March 18.
The number of millionaires in the Asia-Pacific region rose 26 percent to 3 million in 2009, matching Europe and almost overhauling North America’s 3.1 million, according to a report published in June by Capgemini SA and Merrill Lynch & Co. Wealth in the region, excluding Japan, is expected to grow at twice the global rate, the Boston Consulting Group said in June.
Credit Suisse, Switzerland’s second-biggest bank, has added 18.5 billion francs of wealth assets in the region since June 2009, bringing the total to 78.5 billion francs last year.
“Most global wealth managers are banking on double digit growth from Asia,” said Sebastian Dovey, managing partner at Scorpio Partnership, a London-based firm that provides research to the wealth-management industry. “This will help, in their view, their lagging operations in mature markets.”
Quarterly Dip
Credit Suisse may exceed the target if its wealth business in the region continues to grow at about 20 percent a year, said Zurich-based Berchtold, 49. The bank attracted net new assets of 1.5 billion francs in the Asia-Pacific region in the last three months of 2010, the lowest quarterly level in the past two years, according to the firm.
“It is more to do with seasonal cyclicality but I’m confident we can recover from that,” he said. The inflow of new client money this year has been “encouraging” after a record 12.4 billion francs in net new assets in Asia in 2010, he said.
Credit Suisse ranks fifth worldwide in wealth management, which typically caters to clients with at least $1 million to invest, according to a survey by Scorpio Partnership.
“Growth in private banking is very well spread across the Asia-Pacific region, from all markets,” Berchtold said. Australia is one of the onshore markets leading the growth of Credit Suisse’s domestic private banking business in Asia “because of the commodity boom,” he said.
Continuing in Japan
Credit Suisse has put in place “assistance measures” for employees as Japan copes with the worst nuclear accident since Chernobyl and destruction from the nation’s strongest earthquake and a tsunami. The firm started building its domestic private banking business in the country two years ago and has about 60 staff there, including relationship managers. Across all banking divisions, it has about 600 employees in Japan in total.
“For Credit Suisse, we are continuing our business operations in Japan,” Berchtold said. “We are maintaining a very close dialogue with regulators, market authorities, peer banks and global and regional management in the bank.”
The bank also continues to monitor “workplace safety- related issues,” said. “The safety of our employees is paramount,” Berchtold said.
Credit Suisse expects a net increase of 160 relationship managers globally this year, adding to the 4,200 managers at the end of last year, according to the firm. Hiring costs will “most likely” rise this year, Berchtold said.
Swiss private banks may find their expansion plans hindered by a shortage of relationship managers with the ability to attract new assets, according to KPMG.
Boosting Margins
Credit Suisse aims to increase the pretax profit margin at the wealth management division to 35 percent in coming years, from 29.5 percent in 2010, by focusing on costs, Berchtold said.
“We will have to constantly reallocate resources if the revenues are not coming through,” he said. “If markets come back, margins will go back up again towards 35 percent.”
Global margins of 35 percent would be higher than Scorpio Partnership’s industry benchmark for key performance indicators, Dovey said.
“However, the underlying issue is to determine what type of business has to be done to achieve this margin and whether that is sustainable,” he said. “The cost of growth in some regions is placing a big squeeze on the margins.”
Clients in Asia still “have a lot of cash” in their accounts that needs to be invested, Berchtold said. Investors remained cautious last year, investing in “less complex, lower- margin products,” Credit Suisse said in its latest financial report.
To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net.
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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