Under Guy de Picciotto, Union Bancaire Privee has been one of the most prolific consolidators in Swiss private banking. He thinks the M&A music may soon stop playing, in an finews.asia interview.
UBP only really got a foothold in Asia last year with Coutts International, whereas other Swiss private banks are already pulling out of the region. Is the boom fizzling out already?
It's true that the Asian market is sometimes expensive and very competitive. But with the Coutts acquisition UBP has now built a lasting presence in Asia. The combined assets managed by our private banking and asset management divisions there amount to around 17 billion francs. And looking to the future, we believe that region offers a much better growth outlook than Europe. So there are good reasons to stay there.
Is UBP going to expand further in Asia?
We feel our private banking business is served well enough with our Singapore and our Hong Kong sites. However, we would like to hire some more relationship managers. As several other banks are pulling out of the region, that shouldn't prove too difficult.
«We're looking to expand the private client assets in Asia – ideally to 15 billion francs»
But more relationship managers means higher costs. Is UBP's business in Asia profitable?
We're just breaking even with 10 billion francs in private banking client assets. This is why we're looking to expand the assets – to 15 billion francs – in a short-term period ideally.
Meanwhile European high net worth assets keep flowing out, as your 2016 results showed. Will this hemorrhaging continue this year?
Europe stopped being a growth market for private banking a while ago. Last year the automatic exchange of information, which Switzerland implemented at the start of 2017, has had a considerable impact on assets. But I think that most clients have now accepted regularization and gone ahead with it. So I believe the pressure will let up.
«Some money is being shifted – often to the U.S.»
Does this also apply for clients in Latin America, who have also been withdrawing their assets?
Some of the money is being regularized, and some is being shifted – often to the U.S., we've noticed.
Like many other Swiss banks, UBP paid millions to the U.S. in the tax dispute. So this shift of assets leaves a bitter taste, doesn't it?
It's in the interest of a country like Switzerland to rigorously apply automatic exchange of information. The U.S. has signaled an intention to provide information about their banks' clients, but it is not the case yet.
The lower the assets under management, the higher the cost impact. UBP also owes its net profit of 176.4 million francs to significantly lower expenses in 2016. Did the bank also save on salaries?
The savings are particularly noticeable when compared to 2015, when we had exceptional expenses. For 2016, UBP remuneration was stable, or even increased slightly.
That goes against the trend in the industry.
In my opinion, for a bank CEO looking to cut costs, salaries is a very obvious choice, but it inevitably has an impact on service quality. I am not sure that this is the right decision to make on the long run.
«On my control panel the pause and play buttons are very close together»
But UBP also needs to save money?
For the past few months we've been focusing on simplifying the organization and streamlining the bank's processes. For example, we have merged branches and subsidiaries abroad, or closed them where it made sense to do so.
So the bank is no longer in expansion mode?
In the past years we have made several acquisitions. Now we must consolidate and cement a common culture. This does not mean that we will not consider interesting opportunities. On my control panel the pause and play buttons are very close together (laughs).
Has the consolidation pressure within private banking eased off?
I think that consolidation will vanish as soon as the U.S. dollar and interest rates surge. This will give Swiss wealth managers a breather.
«Trust cannot be easily digitized»
However, the industry is still confronted with digitization. In past years you did not seem very happy about this future trend.
Wait a minute – I simply refuse the statement that you can replace bankers by machines. Trust is key in banking. And in my opinion trust cannot be easily digitiZed and emotions cannot be handled by robots. However, we are currently working on ways to provide our advisors and our private banking and asset management clients with digital instruments.
What kind of instruments?
Firstly, our front staff should be able to easily engage with clients using digital communication tools. We are also developing e-financial advice solutions to improve client experience and make selecting investment products and constructing portfolios easier.
You face many responsibilities since your father Edgar de Picciotto passed away. You are a bank manager, the leader of a family business and the head of the family. How do you manage it all?
I may be the CEO of the bank, but I’m certainly not the head of the family! It is far more complicated to lead a family than a business (laughs).
