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Thursday, 12 June 2008

StanChart private bank sees modest growth

* sees slowdown in asset growth
* very worried about financial markets
* has cut equity exposure to 40% from 50%

THE private bank of Standard Chartered expects asset growth from rich clients to slow this year after a 28 per cent jump in 2007, on worries about rocky markets, its top executive said on Wednesday.

The warning underscores rising concern about the outlook this year for private banks, who in the past three years have enjoyed rapid business and asset growth in booming Asia.

Peter Flavel, global head of the Singapore-based private bank, told Reuters he is still very worried about financial markets and has reduced clients' equities exposure to 40 per cent from 50 per cent last year, increasing cash holdings instead.

'We are in very volatile times,' Mr Flavel said in an interview.

'Nobody knows how long this stuff in the (United) States is going to continue to go and a quarter of the world's consumption comes from the States.'

'If you ask me what the most likely scenario is, it is that asset growth will be modest. It is coming off from growth of 20 odd per cent,' he said, adding he 'absolutely' expected to keep growing the business.

Swiss bank Julius Baer also said in January that revenue growth may slow in Asia this year due to choppy markets, but stuck with plans to expand its regional wealth management.

Standard Chartered formally launched its global private banking from Singapore in the middle of last year and has expanded into 11 markets, mostly in Asia - catering to clients investing assets of at least $1 million.

Mr Flavel said the bank is now managing client assets worth $40 billion, ranking it seventh in Asia, from where it derived 37 per cent of its assets.

It has 350 relationship managers and plans to hire another 150 within three years, he said.

UBS , Citigroup and HSBC are the top three players in the Asian private banking market, where clients had assets of $8.4 trillion at the end of 2006, according to a report from Merrill Lynch/Capgemini.

Dead cat bounce
Australian-born Flavel said he was cautious of the recent 'dead cat bounce' that saw financial markets recovering last month from the aftermath of the US subprime mortgage crisis but dipping again in the last few days on runaway oil prices .

Mr Flavel said his clients' appetite for exposure to commodities and energy had risen, while he was also bullish on the Australian and Kiwi dollar but long-term bearish on the US dollar.

Clients were typically keeping 40 per cent in equities, 25 per cent in alternative assets, 25 per cent in bonds and 10 per cent in cash, he said.

'This means we are relatively underweight equities, overweight cash and neutral on alternatives and bonds.'

He said for local clients the bank would have an Asia-centric investment model, with a higher Asian equities portfolio in stocks such as CapitaLand and SingTel .

Mr Flavel, an avid cricket fan who went to the same school in Adelaide as former Australian cricket captain Greg Chappell, said his bank's strength lies in Asia and emerging markets.

The unit's parent earns most of its profits from Asia and is 19 per cent owned by Singapore sovereign wealth fund Temasek Holdings .

Mr Flavel said the acquisition of American Express Bank last year partly boosted its private banking assets and the full integration would be completed by the middle of next year.

The bank's focus was now on growing its existing business, he said.

The bank could take advantage by getting clients from some of the big global lenders, who have been stung by losses due to their exposure to the US housing crisis.

'It has surprised me. I had lunch a couple of weeks ago in Singapore with a big corporate client and he said to me - we like what the bank is doing, we like what the private bank is doing and we are moving our money to you - because he was worried about where he was.' -- REUTERS

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