Christian Cappelli, Julius Baer's head of Emerging Asia, tells finews.asia about how to do onshore banking right.
Over time, most private banks in Asia adopt one of two strategies – to be offshore, footloose and fancy-free or to be onshore, present and committed.
The debate over which is the better approach is a moot one, private banks most often pick their routes based on cost and regulatory imperatives rather than of their own free will.
But for those deciding on an onshore presence, high costs and long break-evens are the norm. Must it be so?
Invest and You Shall Reap
«There are many cost-light models for partnering,» says Christian Cappelli, market head for Emerging Asia at Julius Baer in an interview with finews.asia. «But a joint venture (JV) – if it is done right – requires a strong commitment across the company to allocate resources to the JV. We have committed resources across the board, we have provided and will continue to provide inputs on everything from HR, IT, training – these resources are allocated to the JV.»
The view is a contrarian one to that taken by most pure-plays who have onshore representative offices that allow them to test-drive a market before committing. «Opening a representative office is a relatively low-cost strategy,» agrees Cappelli although he is not completely convinced, «but what we have set up is a solid, serious and comprehensive operation.»
Plug and Play
The bank’s own onshore Asia strategy has been built iteratively through acquisitions and joint ventures in India, Japan and most recently, Thailand. In all three markets, the alliances gave Julius Baer near-instant regulatory clearances as well as access to a roster of significant clients.
«The India business was an unexpected but welcome upside to Julius Baer’s acquisition of Merrill Lynch,» says one employee at the bank who says it’s clear advantages inspired many other attempts to form onshore alliances at the bank.
Most Difficult Aspects
Having clients from the get-go to offset the costs that Cappelli refers to, makes the model a particularly appealing one. In Thailand, where Cappelli is crafting an onshore presence through the bank’s joint-venture with Siam-Commercial Bank, the bank had clients almost as soon as it was legally allowed to do so.
By most accounts, acquiring regulatory clearances and people – whether relationship managers or clients – are the most difficult aspects of building an onshore business. «Having a strong onshore partner is a real differentiation,» Cappelli says.
