Julius Baer playing China waiting game

Asia management at Swiss private bank Julius Baer have said they’re playing a waiting game on China entry, even though they concede now is probably their best chance to address the market.

The Swiss private bank set up a representative office in Shanghai in 2011, as a first step to breaking into China. However, the firm has not made any definitive commitment on this since.

Earlier this year media, Hong Kong’s Sing Tao Daily reported that Julius Baer was seeking to apply for a banking licence to set up in the Shanghai free-trade zone (FTZ).

But Kaven Leung, deputy head for Asia Pacific and CEO for North Asia at Julius Baer, told AsianInvestor that it had not yet applied for a banking licence, saying it still needed to understand fully what it would be permitted to do before taking a decision.

While Leung admitted that applying for a licence to operate in Shanghai’s FTZ was one option it was looking at, he said it was not necessarily the one it would pick for China entry.

“China is a market that has all conditions in its favour. Private banks can’t afford not to get it right,” Leung said in explaining Julius Baer’s go-slow approach so far.

“Today is probably a better time to get it right in entering China than at any other time in the past 10 years. It is more ready in terms of the internationalisation of its capital markets, currency and banking. It is the right time for international firms to come and look at China.”

Asked if Julius Baer should consider itself a late-comer to China’s wealth management industry, Leung disagreed, saying the Swiss private bank was taking its time to understand Chinese clients.

The Swiss private bank entered a strategic collaboration with Bank of China in 2012 to cross-refer clients. This enables Julius Baer to tap BOC’s know-how in the domestic private banking market, while giving BOC access to its own international client base and suite of global solutions.

Only last month Julius Baer released the results of a survey of Chinese HNWIs that it carried out with partner BOC. The findings led Thomas Meier, head of Asia at Julius Baer, to conclude that wealthy Chinese, particularly entrepreneurs, were dangerously overconfident and had unrealistic investment goals, as reported.
 
Leung identified finding talent as the chief challenge for Julius Baer to start its own business in China, a difficulty familiar to private banks in various markets around Asia. “We need to understand clients in a local sense,” said Leung. “We look for people who understand Chinese clients’ thinking and requirements, as well as China’s economic and political situation.”

Boris Collardi, Julius Baer’s group chief executive, said at the firm’s Next Generation Summit in Shanghai last week that he wanted to see China’s wealth management industry develop its own golden triangle: regulatory liberalisations to facilitate private banking and growing appreciation among China’s wealthy of the benefits of both diversification and succession planning.

“We are patient and waiting for the market to mature,” he said, describing China as the most important Asian market to get right for Julius Baer.

Despite China’s broader economic slowdown, figures show its high-net-worth-individual population increased 18% to 758,000 last year, while total wealth rose 20.5% to $3.8 trillion, according to the latest annual wealth report from RBC Wealth Management and Capgemini which ranked China as the second highest growth market after Japan in Asia Pacific.

Julius Baer had SFr274 billion ($290 billion) in assets under management globally as at the end of June, of which Asia accounts for more than 20%. The bank says it has more than 1,000 staff in the region across front-line and support functions.