We speak to Debashish Duttagupta, head of investments for Citi private bank for Asia-Pacific about how the bank has fared since 2008.
The private banking industry world over has faced some perception problems due to regulatory lapses. Have clients grown nervous about entrusting their money to private banks?
There is no arguing the fact that every time a fraud happens, whichever bank it may occur at, clients do think about whether this could happen to their account. However, it is the response of the private bank which determines how the franchise is affected. At Citi we take pride in the fact that we have always provided our private banking clients with the required comfort that they continue to entrust us with their funds. We have done this both by tightening controls every time it is required and ensuring our clients have the confidence that their capital is protected from regulatory lapses.
A number of boutique private banks have beefed up in Asia by poaching experienced staff from established players such as Citi. Are these departures affecting your assets under management (AUM)? Does AUM migrate with the banker?
Our attrition rates have been very low, much lower than the industry average. In general we’ve found that clients tend not to move their entire AUM because the relationship banker who used to service them has joined another firm. They may move a small amount but to move their entire AUM they will need to develop the confidence that the new platform is as secure as we are and will provide them with the same quality of service. Conversely, it has also happened that AUM we have lost has come back because the client has realised the advantages of banking with a large, established player such as Citi.
After the financial crisis in 2008 have clients consolidated their private banking relationships?
Among our private banking clients we have definitely noticed this trend. Our clients have started to recognise that we can offer superior advice on asset allocation, access to research on more products and markets, opportunities to invest in alternatives such as hedge funds and private equity funds, which are not available to some of the more fringe players in private banking.
Some boutique private banks suggest that after the financial crisis clients are keen on firms which focus on private banking and no longer seek multiplicity of products and services from their private banks. What has your experience been?
Asia is still young in terms of wealth creation and therefore the line between personal and corporate wealth is often blurred. The majority of wealth creation has been by entrepreneurs who are still running their businesses. The majority of the working day of the entrepreneur is spent thinking about his core business. Clients therefore choose a private bank who can truly provide a full spectrum of services. We are seeing the ability to offer a complete suite of commercial banking products and services as a significant competitive advantage.