Boutique private bank BSI submitted its application for Hong Kong branch status at the end of last week and is hopeful it will be operational before the end of the third quarter this year.
At present, BSI Investment Advisers (Hong Kong) is licensed by the Securities & Futures Commission as an investment advisory firm, but will be able to book assets in the city if its application is approved by the Hong Kong Monetary Authority.
The Swiss private wealth manager, which in 1998 became part of Italian insurer Generali, has ramped up its Asia presence over the past 12 months and now has more than 200 staff in Singapore, from 30 in 2009.
It follows the arrival of Hanspeter Brunner as CEO of BSI Asia and BSI Bank Ltd Singapore in March last year. Brunner left RBS Coutts acrimoniously in August 2009, having been CEO of RBS Wealth International and joint-CEO of RBS Coutts.
Subsequently more than 90 staff departed RBS Coutts in Asia, many landing at BSI in Singapore. They have now been replaced by the UK-based bank.
BSI has since focused on establishing a Hong Kong business, with Brunner charming former colleague Esther Heer to join the greenfield project as deputy CEO of BSI Asia and CEO of BSI Investment Advisors (Hong Kong) last August.
Having spent the past two decades building the Hong Kong business of Coutts – now wholly owned by the Royal Bank of Scotland – her services were highly prized.
In an interview with AsianInvestor, Heer admits she was courted by many international banks as well as pure Swiss private banks, but says she was mystified by some of their Asia strategies.
“Many of them said they had a strategy to expand and invest in Asia,” she reflects. “But after scratching a little bit below the surface, I realised they had no in-depth knowledge of what it means financially to build a business in Asia.
“You don’t start a business and think it will be profitable in 12 months. This is something that disturbed me when I looked at the various strategies and visions that other banks had.”
Asked whether HSBC Private Bank was among them – given the retirement of its Hong Kong chief executive Monica Wong at the end of last year – Heer laughs. “I think I should not answer because this is rather confidential,” she says. “I don’t want to mention any names.”
But she rubbishes speculation that she joined BSI for the money. “I believe this [BSI] is a jewel that has not yet been cut in the region. I would never have joined a bank that I could not stand up for, because at the end of the day it is my reputation.”
Brunner admits he tried to hire Heer earlier in his career when he ran Credit Suisse’s wealth management business in Hong Kong. This time he believes a big pull factor was the fact they can now build a bank together. “What Esther does here for us in Hong Kong now, she is building a new bank, with a new philosophy and a long-term strategy.”
BSI has had a representative office in Hong Kong for the past 30 years, and it is upon Heer to accelerate its expansion. She has hired over 20 staff in the past few months and now has nearly 50 covering front- and back-office.
She is aiming to have between 35 and 50 bankers in Hong Kong within three to five years, and 120 to 150 staff overall. Right now her priority is to hire market heads for Greater China and the Philippines, as well as senior private bankers. She is also seeking to recruit bankers in Singapore to cover China, Taiwan and possibly the Philippines.
BSI will use its offices in Singapore and Hong Kong to cover the region’s key economies, onshore in those two cities and offshore otherwise.
Asked whether the firm would seek to build an onshore presence elsewhere, Brunner (left) – sitting alongside Heer – acknowledges: “What of course is on the radar screen and blinking very wildly is China and India.”
He says BSI is considering the most appropriate model to enter these two burgeoning wealth markets.
“Pure offshore private banking, cross-border banking, will continue to grow for the next 20 to 30 years, but the onshore markets will become bigger. How urgent is it [to be onshore]? I think we have a few years to find the right model.”
But he emphasises the need for a differentiated approach, to which Heer adds: “I think the thoughts we already have about China are different, which of course we cannot share with you.”
One logical approach would be for BSI to leverage the strong market presence of its parent company in China. Generali is the largest foreign-owned life insurer in China and has an insurance joint venture with China Petroleum and an asset management JV with Chinese asset manager Guotai, in which it has a 30% stake. Generali has said it wants to continue growing with local partners in the country, and the two firms would presumably benefit from each other’s contacts.
At the same time as applying for branch status in Hong Kong, BSI is also weighing up its options in terms of providing RMB products and services, for which it needs to fulfil certain requirements.
“My personal view is that a Chinese service offering needs to go much further than RMB products out of Hong Kong,” says Brunner. “It has to go into RMB-, US dollar- and euro-based products inside China. That is going to develop over the next few years very clearly.”
In terms of product capabilities, Brunner says BSI can do anything, drawing on expertise in Lugano where BSI has 150 investment specialists. “There is a lot of knowledge and experience in Lugano, which in the last 12 months we have moved into Asia, creating an Asian version of the standard investment products. We have experts here [in Asia] on the trust side and on the credit structuring side.”
BSI also has a sizeable universe of third-party products, and is building alliances with small corporate investment organisations that it does not compete with.
“There are very capable boutiques we can work with in various areas,” says Brunner. “It is more with small and medium-size enterprises [SMEs], because the big players are not interested in SMEs. I think there is a big niche there, to bring SME clients together with corporate finance people. I think this is something that could be very beneficial in the future.”
In terms of BSI’s Singapore operation, Brunner is 95% where he wants to be. He says he will add a few more staff on the advisory and research side as the business grows, and is potentially looking to reach out to non-resident Indians in the Middle East.
BSI Group's assets under management currently amount to SFr76.2 billion. Its Asia business boasts $7.6 billion and is now over 10% of overall AUM, having started the year below 4%.
Brunner predicts that BSI’s Hong Kong and Singapore offices will have a combined $15-20 billion in AUM by 2015.
But he suggests that BSI’s sudden growth story will never be replicated. “At that moment all the stars were in the right position – the push factor was strong after the crisis and clients were in the right mood. But I don’t think this will happen again, and rightly so because ultimately it’s not healthy for the industry.”
“Sooner or later [BSI] will be a case study,” suggests Heer.
See AsianInvestor's February edition for a detailed Q&A with Hanspeter Brunner and Esther Heer.