REUTERS SUMMIT-Private bankers cautious over China onshore strategy
(Reuters) – Some large wealth managers feel the time is not ripe to start an onshore private bank in China, despite steps taken by Beijing to open up its financial services industry.
Ownership restrictions and a relatively less developed capital market are impediments for Citigroup to start onshore private banking in China, while British lender Standard Chartered is also in no rush, senior executives of the banks told the Reuters Wealth Management Summit.
Their strategy contrasts with those of UBS, the biggest wealth manager in Asia-Pacific by assets in 2014, and fast-growing regional banks such as DBS Group Holdings which have both started onshore private banking in China to tap one of the world’s fastest growing centres for millionaires.
“The domestic capital markets are not that developed for the time being,” said Bassam Salem, head of Citigroup’s private bank in Asia Pacific.
“For me to be onshore in China, I need to have a brokerage license and a trust license. I can only have 35 percent of that business, which means I do 100 percent of the work and I get 35 percent of the profit. It’s not a good business proposition,” Salem said.
An offshore presence remains the preferred route of many international wealth management firms who want to tap into the millionaires spawned by China’s booming technology sector and its soaring stock market.
A senior StanChart executive said the bank was for the time being focused on offshore private banking to cater to China, although an onshore offering could become attractive over time.
“I believe the most important aspect is how will the domestic regulation change and evolve over the next year to facilitate the domestic value proposition of private banking,” Michael Benz, global head of private banking at StanChart, told the Reuters Summit in Hong Kong on Wednesday.
“As of today there is very limited scope for that. I don’t think there is any urgency to have a large onshore private banking business, but see the opportunity and value to have a small operation set up for the purpose of relationship building,” he said.
StanChart maintains a retail and priority banking presence in China that can help it refer wealthier clients to the offshore private bank.
Citi’s private bank, which manages clients with at least $10 million in assets, said it has seen strong growth in its offshore China business and plans to boost its headcount by 10 percent a year. Salem did not disclose the size of the Citi’s private banking assets in Asia and nor the number of staff.