Chinese customers in the past were known as being happy to take risks and as dedicated traders, until they learned their lesson the hard way, Bank Vontobel's Georg Schubiger says in an interview with finews.asia.
Mr. Schubiger, Bank Vontobel is running its operations in Asia according to a boutique business model. How would you define this model?
Our branch in Hong Kong is not in direct competition with the big banks in that market. We consider ourselves a wealth manager for Asian customers who want to diversify their assets.
We have the proper infrastructure for that purpose and are booking our customers' assets in Switzerland. This setting is very efficient because we can save costs and we have great growth perspectives.
What do you mean with diversification?
In Asia, in the past three or four decades most wealth was created through entrepreneurship. Those people have now reached an age where they want to safeguard their wealth or pass it on to the next generation.
«People begin to realize that the old Hong Kong is turning more and more into a part of China»
That's why they want or need to diversify. I don't mean diversifying simply across asset classes, but also in terms of currencies and geography – and that's where we enter the frame. Typically, we are not the first bank for a customer, but a further option in addition to his existing banking relationship.
What do you offer those clients?
Chinese customers in the past were known as being happy to take risks and as dedicated traders. They also mainly focused on shares in Hong Kong until they learned their lesson the hard way, when the market almost halved in value.
Also, people begin to realize that the old Hong Kong is turning more and more into a part of China. With this background, the international diversification is in demand – with other booking regions, asset classes, with less risk and lower volatility.
Aren't you too late with this value proposition and aren't you simply too small for Asia?
No. We waited for this phase. Size isn't absolute, it has to be seen in relation to the business model. We aren't a bank that wants to gain market share with large loans and trading strategies.
«Our team is small, but we aim to expand»
We need saturation among entrepreneurs, which in turn leads to a need for diversification. And for that purpose we are the right size.
And how far have you come with this strategy?
We don't publish the numbers but the business with Asian customers is profitable. Our team of eleven relationship managers is comparatively small, but we aim to expand. We are growing organically.
Is your Swiss heritage relevant for business in Asia?
Absolutely. After all, we're booking customer assets in Switzerland and a majority of our investment competence is based in Switzerland. Our customers, who mostly are entrepreneurs themselves, value the fact that the bank has had the same owner family for 91 years, a family that has the entrepreneur DNA and understands perfectly well the needs of this customer segment.
«Banks in Asia all too often are anonymous giants where you don't even know who owns them»
It lends us enormous credibility: more than 90 years with the same name, same owner, strongly capitalized and without having undergone a serious crisis, not having been taken over or relied on state aid – try to find something similar. Banks in Asia all too often are anonymous giants where you don't even know who owns them.
While Asia evidently means good business, growth perspectives in Europe are rather more subdued. Many banks concentrate almost exclusively on cost savings to achieve acceptable levels of profit. Which one is Vontobel's strategy?
Fact is that European wealth isn't growing as much as in Asia. Therefore, we have a process of elimination taking place in our region. But I'm not that pessimistic about it.
How's that?
Well, this is a entirely normal situation. We all are fighting to grow and for market share. It is possible to grow in a saturated market if you manage to fashion your offerings to the liking of customers.
What does it take?
A trustworthy strategy that clients recognize as such. You can't scale private banking just as in institutional banking – you need bankers who know how to approach existing and potential clients. You won't win their recognition with power point presentations or memos.
Has Vontobel the necessary size in Switzerland and in its European target markets?
Absolutely. The necessary size is always to be seen in conjunction with the corresponding business model. And with what we do it is definitely the case. We are not active in 60 markets but in a set of choice focus markets. The clients are booked on our Swiss platform and we cater to their needs across borders.
«Without our digital strategy, we wouldn't be able to manage our Asia business as leanly as we do»
In wealth management, we clearly have the necessary volume with more than 43 billion Swiss francs in assets under management. Vontobel has a broad base, with the three divisions Private Banking, Investment Banking/Structured Products and Asset Management. This provides us with further synergies. And it makes us an attractive employer.
Other banks nowadays are restricted to making savings. But Vontobel isn't?
A savings program is counterproductive if you want to grow organically as a principle. We manage our resources efficiently and use them sensibly.
We don't want to lose money, but neither do we want to get into a negative spiral by simply removing costs. We've made big investments in the digital infrastructure for efficiency purposes. Without our digital strategy, we wouldn't otherwise be able to manage our Asia business as leanly as we do.
Is the consolidation in Swiss banking slowly coming to an end?
No, it continues unabatedly. We have to distinguish between a quiet consolidation, whereby customers are concentrating their invested assets at one bank and a consolidation through mergers and acquisitions. There are still many banks which have no choice but to be swallowed by a bigger rival because of mistakes in the past.
«You're not buying a black box anymore»
Consolidation may actually accelerate now that the tax dossier with the U.S. is about to be closed and the automatic exchange of information is introduced. Because the implicit risks of a takeover decline – you're not buying a black box anymore.
Seen that way, there will be new chances for Vontobel. What does your preferred candidate look like?
It would have to be active in the same markets as Vontobel. We only buy what we're doing ourselves. The size has to be at an acceptable level, the culture similar to ours and the risk potential ought not to rise.
«When do you best talk to your clients, if not in challenging times?»
And last but not least, the price paid should ensure that the takeover would be seen favorably still in five or ten years time.
With these plans, are you aiming at Switzerland or at a foreign market?
Primarily at Switzerland. Outside Switzerland we would rather buy a wealth manager than a bank.
While the consolidation presents you with opportunities, the outlook on the markets in general is rather bleaker. Customers are reluctant, stock prices are volatile and the persistent negative interest rates weigh on business. How do you see the further development?
The negative rates do hurt, not least because cash is part of almost every single client portfolio. We have to deal with it. The markets currently also present opportunities. Because when do you best talk to your clients, if not in challenging times? Of course I wish that there would be no negative rates. But we don't make money by moaning.
Georg Schubiger is a Swiss Citizen and Head of Private Banking at Zurich-based Vontobel since 1 August 2012. After his studies at the HSG Business Administration/Management, University of St. Gallen in Switzerland, and at the College of Europe Bruges, Belgium he joined McKinsey & Company in 1996 first in Zurich and then in Helsinki, Finland. Later he worked for Sampo Group and joined Danske Bank Group, Denmark, in 2008 where he had the role of Chief Operating Officer from 2010 to 2012.
