He is one of the longest-serving bank CEOs and shows little sign of stopping anytime soon. Instead, Guy de Picciotto is on the prowl for another acquisition. In an exclusive interview with finews.asia, he discusses the practical difficulties of implementing the government’s sanctions and the reasons for Credit Suisse‘s collapse.
Guy de Picciotto, what are you seeing in Asia?
Hong Kong and Singapore have already begun to position themselves as offshore centers for wealth from China. Many foreign wealth managers are going into Asia with this in mind.
Is going onshore into China an option?
We are present in Shanghai where we have an asset management business and manage two funds. We also recently opened a wealth management franchise in Hainan.
«We must be agile and opportunistic»
Hainan is an important financial center, maybe smaller than other cities in China but three times as large as Switzerland. We have received a license to operate and employ seven people there with the ambition of growing rapidly in the UHNWI and family office segment.
How did you find out about Hainan?
It was one of those opportunities you get through personal connections that emerged as we were looking at acquiring a license. We can’t articulate a massive business development plan in China like UBS does, for example. We must be agile and opportunistic – within the realm of what is possible.
We must always ask ourselves what we can do to stand out and what kind of talent we need to hire. Whether in the short or long term, China will be a gigantic wealth management market.
You just turned 63 this year. Are you thinking about retiring?
Yes certainly. But not before I’m 65, and not even then.
Are you already thinking about succession?
Yes, constantly.
Do you have a plan?
My considerations are aimed at whether there is enough expertise in our family. But that should be relatively easy.
Why?
My nephew, my brother’s eldest son, has been working for eight years at the bank. He started in private market investments and is now in the Wealth Management division. My own eldest son will join soon while my youngest just founded a start-up in the sustainability field. It will take a bit more time for him to join us.
«I do not feel like a 63-year-old»
In short, the bank has suitable and sufficient replacements. Also, I do not feel like a 63-year-old. My father (bank founder Edgar de Picciotto) retired at 82, so I still have a few years ahead of me. But I think I will be taking that step before he did.
What motivates you to keep working as CEO after 25 years?
I love the challenge. Every day is completely different. We constantly have to adapt. Within the span of a few months, we had to deal with the Covid-19 pandemic, the Ukraine war, interest rates, inflation, recession fears, China reopening, and the Middle East’s spectacular growth. The world is changing fast.
«I will certainly not write a biography or ask anyone to write one!»
If the young generations are ruling out working in a private bank because they think the environment is too static, they are mistaken. As a financial institution, we sit right in the middle of all the changes happening in the world.
Despite all this, you have been doing this for a very long time. What would the title of your biography be?
I will certainly not write a biography or ask anyone to write one! I don’t like talking about myself.
What would you characterize as your guiding principle as a private banker?
More than being a private banker I feel responsible for running a family business and making it successful. Ultimately, it’s about effectively continuing what my father started 50 years ago
What do you think will happen now?
Naturally, I hope the next generation will be as devoted to the bank as we are. There are very few real family banks in Switzerland and worldwide that belong to a single family.
It makes a big difference compared to other private banks where some families have joined up. That is not the same thing, in my view.
We have a governance model that our clients appreciate enormously, as do our employees. It is what differentiates us from larger financial institutions, some of whom are listed. We are more personal.
Will the de Picciotto family stay together?
Yes. The bank is family-owned and will remain family-run.
The past three years have turned the world upside down. How has it changed banking?
It has not changed banking. There have always been crises and there will be others. Historically, the private banking sector has always managed to adapt to the new environment and requirements. The pandemic exacerbated the need.
Before Covid, we were still dealing with the effects of the 2008 financial crisis, with falling interest rates and the impact of massive quantitative easing.
Then, shortly after the pandemic, it looked like we were returning to a form of normality, where negative or extremely low-interest rates were no longer prevalent. Then the war in Ukraine broke out, which resulted in an exponential rise in inflation, higher interest rates, and an energy crisis.
«Sustainability should be seen as a new industrial revolution»
During the pandemic we also had to cope with new, almost unimaginable working models – working remotely and communicating digitally with clients.
Will all that change the profession of a banker?
I don’t think so. Managing portfolios, investing in financial markets, meeting clients, and identifying their needs, are and will always remain at the center of every client advisor’s job. The only decisive change in our sector is integrating the sustainability dimension into investment decisions.
Why?
Because EU regulators and governments have unleashed an arsenal of rules and regulations on ESG that will have a strong impact on our sector and operations.
Is that an opportunity or a curse?
Sustainability should be seen as a new industrial revolution. As such it will bring new risks and opportunities to take into consideration, for clients, and our activities. But for it to happen, we should probably be seeing more incentives from authorities to channel client investments.
It looks like regulators are currently more focused on addressing the issue of «greenwashing» rather than assessing the «green» impact of companies’ activities. Of course, a certain amount of supervision is needed, but first, we need regulators to issue clear guidance for measuring a company's sustainability performance.
How does the Ukraine war impact your activities?
The war had a significant effect on inflation levels and the energy markets. But the real challenge has come from the sanctions. I am not talking about individual sanctions against certain business sectors, or Politically Exposed Persons (PEPs) and oligarchs. Rather, I am referring to the fact that even «normal» Russian citizens now have severe restrictions on how they can manage their wealth.
«The State Secretariat for Economic Affairs, SECO, is not very informed about all of this»
That means we have to conduct due diligence on every single Russian client to define what we can and cannot do. It is highly complex because there is no consistency worldwide when it comes to the global sanction regime.
Do you still open accounts for Russian clients?
Yes, if they are dual nationals and if we have clear evidence that they have a European domicile outside Russia.
Do you think the sanctions are a risk for our country and the Swiss financial hub?
Simply imposing sanctions is child’s play, and there are a lot of details that need to be considered. What happens with outstanding loans? What do we do with trusts? How can a client transfer money within Europe when the sanctions are unevenly distributed? It is all very difficult and the State Secretariat for Economic Affairs (SECO) is not very informed about all of this.
«For the first time, I am also seeing a dialogue with other banks»
Switzerland and EU countries tend to be very quick to impose sanctions. But they often have no answers when they are faced with questions on how to implement the sanctions.
And how do you manage this ignorance in practice?
Every morning we have a meeting with the Head of Compliance, compliance officers, and the regional heads for Eastern Europe to discuss the latest sanctions and what needs to be done.
For the first time, I am also seeing a dialogue with other banks. At the end of the day, we are all looking for information that will help us better understand the situation. But the easiest would be to have an office in Berne that could answer all our questions.
Did you have to cut the number of personnel in the departments responsible for Russian clients?
No, as those relationship managers are continuing to manage their existing client books that have not been sanctioned. They get asked many questions and are committed to this market. They have also started to explore other potential markets, though.
How large is the proportion of Russian clients at your bank?
The assets under management in our wealth management business totaled 117 billion francs at the end of December 2022. Considering all clients with a Russian background, they make up about ten percent of that. While domiciled Russian clients make up less than four percent.
How much of that comprises blocked assets?
Extremely little. In all our bookings it represents a handful of clients and a negligible fraction of our assets under management in this market. We’ve always been very selective.
What are your growth markets?
The Middle East is certainly an engine of growth. There is a large clientele in that region looking for sophisticated investments and has always had an affinity with Switzerland. Our office in Dubai is developing extremely well and we are hiring.
«There are currently no transactions in wealth management»
Asia, along with Singapore and Hong Kong, remains an important growth region and probably the largest one. Even though we experienced headwinds last year, wealth creation is strong in this market. A large proportion of that wealth is managed in Swiss private banks as we still have incomparable know-how in wealth management and a solid reputation.
Isn’t that likely to change soon given the recent collapse of Credit Suisse?
Outside Switzerland, the rescue of Credit Suisse was very well received. Even the Fed reacted positively to the takeover by UBS. It should be acknowledged here that the Swiss authorities did what needed to be done to preserve the reputation of the Swiss financial center.
Takeovers are an ideal way to grow quickly. And you have proven that repeatedly in the past. What are your plans in that regard now?
Acquisitions are a way to accelerate growth. But you cannot plan acquisitions. It remains an opportunistic strategy. If there are candidates and they are affordable, then we will look into it intensively and move quickly. Not only in Asia but also in Switzerland and Luxembourg primarily.
How does the market look right now?
Completely in the doldrums. There are currently no transactions in wealth management.
Why?
I think that all wealth managers who decided or were «forced» to exit unprofitable markets or businesses have done so by now. Also, the higher interest rates have given enough breathing room to the rest who were on the edge, at least figuratively.
Regulation and the associated costs were a driver of consolidation and there are currently no other factors out there that are encouraging players to sell.
Are you shifting wealth management activities from Geneva to Zurich?
I wish I could! Seriously. Since UBS and Credit Suisse decided to maintain only local desks and operations here in Geneva, the global wealth management business and the talent pool have gravitated towards Zurich.
In the past, Geneva was the hub for European clients mainly from France, Italy, and Spain. But given the various tax amnesties in those countries and the implementation of automatic exchange of information, the market has shrunk massively. Nevertheless, Geneva remains attractive for Latin American clients, and those from the Middle East and Eastern Europe. We are also developing the Swiss domestic market both in Zurich and Geneva. But the trend is clearly in the direction of Zurich.
It explains why you are growing in Zurich as well then.
Yes, with 22 billion francs in assets under management we have solid foundations and a critical mass, and our business in Zurich is steady. Also, we have made several acquisitions in the past few years and we are still looking for external growth opportunities to expand our footprint. We now have the size that allows us to be attractive to entire teams working for established Zurich institutions. That was not the case previously.
UBP is also present in Ticino. What does that look like financially?
It works because we have built a profitable franchise there, managing close to 3.5 billion francs of assets. We have a long history in Lugano, one that goes back to 1985/86 and our original name – Compagnie de Banque et d'Investissements (CBI). We employ about 30 people there.
«Ideally, we would find a suitable target to acquire in Ticino»
The problem in Ticino is how to keep growing. The local financial sector has been impacted because the airport no longer has scheduled commercial air traffic. Beyond that, there is the question of access to the Italian market, which has become very difficult, if not impossible.
This nevertheless doesn’t put our presence there in any jeopardy. Ideally, we would find a suitable target to acquire locally, gain the necessary critical mass, and keep growing. Otherwise, let’s discuss this again in ten years.
How did you try to solve the issue of market access in Italy?
We are locally present in asset management in Milan. We tried opening a branch of UBP Luxembourg in Milan for private clients but we realized that was not the right way.
For the time being we are focusing on institutional clients and family offices since we have identified a strong appetite from both segments for exclusive investment solutions such as hedge funds and private markets. This is something we are well known for.
Does a bank have to be more flexible today when it comes to opening an account for a client? In other words, have you lowered your entry criteria?
No. Because Swiss private banking is expensive. In other words, to take advantage of all the services and sophisticated products a Swiss private bank can offer, you need a particular volume of wealth.
«It actually was the case that Credit Suisse’s culture was more aggressive than that of UBS»
The trend towards higher entry criteria has picked up in the past few years. But I would not say that we now only take clients with at least 25 million francs.
What are the deeper reasons for the collapse of Credit Suisse?
The combination of unhealthy risk culture, high management turnover, and mismanagement of communication, including on social media. There’s a lot of talk about risk culture now, and it was the case that Credit Suisse’s culture was more aggressive than that of UBS.
I think that banks that were seriously impacted by the 2008 financial crisis and managed to recover afterward were ultimately strengthened by the crisis. I think what was fatal for Credit Suisse was that they held on to investment banking, and the related high-risk tolerance from that business was what sounded the death knell, ultimately.
Are you profiting from the problems at Credit Suisse?
Like other banks we are always looking for opportunities to onboard talented people and to strengthen our teams on the front office or investment side, but also within support functions. We do receive interest, whether it is in the form of client queries or relationship managers’ job applications, without having to search actively.
If you are not heading into retirement any time soon, what do you still want to achieve as the CEO of your bank?
I would certainly like to improve growth, and should an acquisition turn up, I would look at it very closely. Making a «morphing transaction» before I head off into retirement, why not!
«I prefer to watch others working»
At the same time, I want to ensure a smooth handover to the next generation and keep the bank in the family. Finally, I wish for UBP to be recognized for its untarnished reputation and the quality of its people. I keep saying we will be the best bank if we have the best people. It’s as simple as that.
Do you have the feeling that you still work a great deal?
No, I prefer to watch others working. More seriously, it’s important for me not to be involved in the day-to-day and keep a «helicopter view» to some extent. This is something I learned from my father.
Guy de Picciotto has been the CEO of Union Bancaire Privée (UBP) for a quarter of a century. After completing his studies at Webster University, he worked as a management consultant for three years. From 1986 to 1988, he completed a banking education at various institutions such as UBS, Morgan Stanley, Bear Stearns, and Sanyo Securities. In 1988, he joined the Compagnie de Banque et d'Investissements (CBI), founded by his father Edgar de Picciotto in 1969, later renamed Union Bancaire Privée.
