Julius Baer’s Asia CEO Thomas Meier has reiterated the Swiss private bank’s desire to acquire in the region after reports confirmed its bid to buy a controlling stake in Sarasin had failed.
Over lunch this week with AsianInvestor, Meier also underscored his personal commitment to Julius Baer’s Asia expansion plan and discussed the bank’s evolving business model as market dynamics force private banks to wean themselves off transaction-driven revenues in the region.
Plus he outlined the firm’s ambitions for China, with Julius Baer set to announce today the official opening of its representative office in Shanghai with Yan Sun confirmed as its chief rep.
Just this September Meier relocated from Singapore to Hong Kong to fill the void created by the exit of North Asia CEO Andrea Benenati, who moved to set up as an independent asset manager.
And last month Julius Baer announced the appointment of Kaven Leung from Goldman Sachs as its new deputy Asia chief executive and North Asia CEO, effective from April 19 at the latest.
AsianInvestor has reported that Leung is seen as an Asia leader in waiting, having performed such roles previously for both Goldman Sachs and Citigroup.
But in the form of a polite rebuttal, Meier stresses: “I am here to stay for the foreseeable future. I have known Kaven for quite some time and we get along extremely well. I am looking forward to a fantastic cooperation.”
In AsianInvestor’s view, foreseeable future means five years. But educated guesswork could see Meier relocate back to Singapore as early as next year once Leung has his feet under the table.
Nevertheless, he will remain in the region to serve the Julius Baer cause, which he confirms could include another acquisition. Just last month it agreed to take over Macquarie’s $1 billion Asian private wealth arm in a deal that gives it handy access to an independently managed investment banking engine.
Although Meier refuses to confirm or deny Julius Baer’s bid to buy a controlling interest in Sarasin – a deal recently won by Safra Bank for more than SFr1 billion – he admits that scale is something Julius Baer covets as a means to compete in an environment where clients are sitting on the sidelines and the cost of compliance is putting a burden on business bottom lines.
“Building on the story of scale and the fact that we have capital we can invest, it would be quite natural we could continue to look for a possible target in that [private banking] space,” he says.
Julius Baer Group’s AUM stood at SFr166 billion as at the end of October – static from the end of June – and supported by annualised net new money in Asia of between 4-6% so far in 2011. It also has a BIS tier-1 ratio of 20.1%.
On the question of profitability, Meier notes that Julius Baer has no investment banking business to prop up, but admits: “We are not immune to the markets.
“In Asia all clients tend to be transaction driven and this business has come under pressure across the board, although I can confirm we have black zero.
“I am actually quite positive for 2012. We have done our homework, and we can continue the journey [in Asia] that we have started. We are still going to grow. If you do not have the ability to buy something, you continue to add on through hiring.”
He points to the generational transition of wealth taking place in Asia, and the need for private banks to establish themselves as the provider of choice for the discretionary part of financial management to the next generation.
He argues that Julius Baer is putting the pieces in place as entrepreneurs return to investing in their businesses, something they know and understand (as opposed to financial markets).
He points out that it has just established a trust company in Singapore, while its Macquarie transaction gives it access to investment banking expertise and business cross-referral benefits.
“I truly believe we are well positioned to capture revenues,” he says. “If you are relevant and can address client needs, then they are willing to pay for it. Looking at the range of services we have, we are reducing dependency on pure transactional volume and have added more revenue-generating services which are relevant for clients.”
Meier confirms that a key avenue for private banking growth in Asia will be onshore business. With that in mind Julius Baer is set to announce later today the official opening of its Shanghai rep office, with Yan Sun as chief rep officer.
She actually joined Julius Baer in January this year as a managing director and is responsible for business development strategies in China, having previously worked as rep officer for Credit Suisse investment bank in Shanghai and deputy manager for Credit Suisse's Shanghai branch.
“This is always seen as a natural first step in order to get access to the mainland market,” says Meier. “The rep office is a very important step and it allows us to interact with the regulator and for them to get familiar with our name.
“But it has limited scope of what it can and cannot do, so at some point in time I hope we can scale up with a bigger venture in China. I want to have a more meaningful presence.”
The challenges will be regulatory as well as who to partner with and what that partnership entails in terms of management control and branding related issues.
Julius Baer has an onshore presence in Singapore, Hong Kong, Shanghai and Jakarta (advisory). Meier sees these four as its key strategic markets, and points to India as potentially its next destination. “This is part of an ongoing process and something I will carefully look into.”