Liechtenstein-based boutique VP Bank has denied media speculation it is scaling back in Asia, stressing it will continue to strengthen its wealth management business in the region.

Nevertheless headhunters in Hong Kong and Singapore confirm departures, with seven recently recruited relationship managers having exited only this month. Asia CEO Ian Pollock – who was hired with a growth mandate at the start of this year – has also just stepped down.

Interestingly, VP Bank confirms that Pollock will not be replaced – in other words there will be no Asia CEO. Its regional business will be run by Reto Isenring, managing director in Singapore, and Clare Lam, executive director in Hong Kong.

It could be argued that this backs up assertions the bank is foregoing its Asia expansion project, which Pollock outlined at the start of his tenure in January, and is entering maintenance mode in an effort to scale back to a level of costs where it can make a profit.

VP Bank Group saw its net operating income sink 11.3% year-on-year to SFr224.5 million ($238 million) across 2011, with a 4.5% drop in client assets, a 63% fall in net income to SFr6.4 million and an 8.3 point rise in cost-income ratio.

Within international private banking, which includes VP Bank (Singapore) and VP Wealth Management (Hong Kong), its semi-annual results for the first half of 2012 reveal an 8.2% drop in total net operating income and a 7.7% rise in headcount.

But in an emailed response to AsianInvestor questions, Isenring is unequivocal on Asia. “We are not scaling back the Asia business at all,” he counters. “We continue to strengthen our wealth management business in Asia.”

Last week private banking news source WealthBriefing published what it claims is an internal memo from VP Bank saying the board had decided its major focus in Asia would be on growing its intermediaries business.

“The business with private clients will be conducted with a re-dimensioned, standardised offering of VP Bank Group products and services, this with a primary focus on profitability and less on growth,” the memo was quoted as saying.

The intermediaries business is one in which the bank acts as trade execution and custodial agent for external asset managers and independent financial advisers with their own clients. The model is built on scale and efficiency and sees the bank share revenue with the intermediary; but clearly revenue would be low for a bank compared with handling its own private clients.

While he did not deny existence of the memo, Isenring says: “Contrary to market rumours, we would like to reiterate that VP Bank remains committed to wealth management in Asia and, of course, highly experienced senior private bankers are still welcome in our Asian subsidiaries.”

A senior recruiter estimates 60% of VP Bank’s private client marketing staff hired in Hong Kong and Singapore in the past six month have been terminated, at least one having been employed for less than a month. But at the same time she says its intermediary team in Singapore remains intact.

On the question of departures, Isenring says VP Bank made a decision to part ways with non-performing employees, and that as of now it has around 40 staff in Singapore and Hong Kong.

“The management of VP Bank Group has reviewed the performances of staff and management in Asia, and to allow sustainable growth of the Asia business has made a decision to part ways with non-performing employees,” he states. “This is a normal process for all banks to sustain themselves with healthy performance results.”

Industry sources indicate that VP Bank took a strategic change of direction on Asia after Hans Brunhart retired as chairman of the board of directors this April. Three months later chief executive Roger Hartmann quit after two years at the helm. While the official line was that his exit was to pursue other interests, sources say it was due to a strategy disagreement.

“The strategic direction to build out Asia came from the former chairman and CEO,” says one recruiter. “Their departures led to a change of thinking where the bank won’t be focusing on Asia for its growth and private client business.”

She suggests the bank will be offering a more standard European solution in future with no Asian credit policy, and points out that one of the new Asia joiners to survive the recent outflow of staff – Patrick Donaldson – is serving non-Asian clients in the region.

After its 2011 results VP Bank initiated an efficiency programme to cut group costs to a base of SFr160 million by the end of 2013, with total operating expenses down 10%. Measures include group-wide organisational adaption and identifying new niches to generate sustainable growth.

But VP Bank’s apparent cutbacks do raise questions over whether the boutique private banking model can work in Asia as regulators clamp down on locally incorporated firms taking on more overseas clients.

“To be successful [as an overseas boutique] you have to be willing to adapt your offering to Asia and adopt Asian credit underwriting standards,” argues one industry source. “It is still very conservative but different to what is done in Asia.

“Most of the other small boutique banks tend not to want to orient their offering to Asia either, and that tends to limit the upside potential. But there is definitely a market there.”