What is Standard Chartered Grindlays?
Andrew Hunter: Standard Chartered has operated in the emerging markets for 150 years, and about a year ago we acquired Grindlays from ANZ, and that gave us an even stronger position in the Middle East and South Asia. Our position today, is the leading emerging markets bank.
When we bought Grindlays, we also acquired Grindlays Private Bank and Grindlays Trust Corporation which we are putting together with Standard Chartered's businesses in Jersey. This has created Standard Chartered Grindlays, which is entirely focused on clients in the emerging markets. We have $7 billion of assets under management and 25 years of history. These assets are typically from our Asian, Middle East and African franchises.
Why did you decide to keep the Grindlays name?
Mainly because it is a strong brand in South Asia and the Middle East. Also because we are the offshore part of Standard Chartered, we felt the Grindlays name helps differentiate us from the onshore component.
A bit like HSBC using the name HSBC Republic for private banking?
Exactly.
What's driving this strategy?
Mark Devadason: We've looked at where the wealth is in the world.á An estimated $2.8 trillion of wealth is invested offshore from Asia, the Middle East and Africa and that is by investors who hold over $500,000.
What we understand from external market data is that in Africa and the Middle East, a higher proportion of wealth is invested offshore than in Asia. But the total wealth in Asia is so large, that it leads to an equal sized number.
Will more Asians use offshore banking in the future?
It depends on whether the uncertainty in the world continues. Generally, Asians have a lot of investment opportunities in their home market. But I do feel that as people get wealthier, they like to diversify their wealth. And as they do that, they like to put it into other jurisdictions. And so it is more likely to increase than decrease.
Hunter: This year we have created a single booking centre in Europe - moving our London and Swiss booking centres to Jersey. We recognize that private bankers and product specialists need to be close to the client. In Asia, we opened this office last week.
Mark is running the Asia Pacific Region for Hong Kong and has recruited a team of nine including private bankers and trust specialists.
What is the target income bracket you are going for?
Hunter: At the moment we have a fairly broad-based business. We have priority clients, global clients, and private banking clients. Typically, global customers will have below $100,000, priority is between $100,000 and a million and private banking clients are $1 million and above.
We have products for that entire group. But we do need to work on how we differentiate the client experience between those three categories.
On the private banking side, are you going to focus on people of assets between $1-5 million, or are you going to go head to head with UBS Private Bank and target those with $20-30 million as well?
Hunter: Private clients are $1 million plus. We don't have a ceiling. The whole point of focusing our marketing and sales unit in the region, is to work side by side with the domestic bank and decide what is the most effective way we can develop offshore business.
Mark has been working with the corporate and consumer bank to determine which segments we should be targetting.á A lot of private clients will come from our corporate banking relationships.
So you will generate a lot of leads through the corporate bank?
Devadason: Where we will distinguish ourselves from a traditional private bank is that we have a very strong franchise in Asia.á Our plan is not to start building an isolated organization, but to provide a specialised service to high net worth individuals who own or run the corporates we bank, or for those onshore clients who want a European booking centre. That's why we won't present ourselves as a pure private bank. We are an offshore bank with private clients.
So if you're working with medium sized corporations in Thailand or Indonesia and are lending to them, you will try and migrate them to your offshore banking business - just as fx and cash management leverage off one another?
Devadason: It's not an exact analogy, but you're right it should be a symbiotic relationship. If the client is expressing a need for private banking, and we have been banking them for 40 years, it might be that we offer to help them manage their family wealth through trust and investment advice, and through geographic diversity. We will be leveraging Standard Chartered's name and brand and the fact that we've been here a long time. We have opened in Hong Kong and Singapore will be the next place Standard Chartered Grindlays considers opening an office.
Why has trust and estate planning started to grow so rapidly now in Asia?
Devadason: Over the last few years people have realized that they are working in an environment of constant fluctuation and change and I don't think anyone can predict the future. Those people who have created wealth, are starting to try and ensure some certainty for their children and their families. That's why we are growing our trust business.
I am amazed at the sudden interest within our client base at having conversations with our trust people. They are working round the clock right now. Trust is a complex business, and I've employed a very senior trust lawyer experienced in Canadian, Hong Kong and British law and who is very familiar with Jersey trusts. There is no off-the-shelf solution with trusts.
But we have a team in Jersey of 40 trust specialist to back the effort up.
Our people in the field will mostly have the first conversation about trusts and Jersey will back it up and do the rest. As we get more interest we will put more experts on the ground in places like Singapore.
So what is the opportunity?
Devadason: A quarter of the world's high net worth individuals are based in Asia. More recent data has said that number has stabilized rather than grown but it is still a very substantial number. Standard Chartered is embedded in these markets.
Interestingly, four in five of Asia's wealthiest families currently don't use private banks. That suggests to me that the market is still relatively fragmented. The Asian clients we've known and banked, trust us and that is where we have the capacity to grow quickly. I believe we have an unrivalled market opportunity.
As people get wealthier they look for greater geographical diversification, and put a larger proportion of their wealth in other regions. But when they do diversify abroad they tend to be more conservative. Our product set caters to this.
According to a survey we've done, around 53% of our clients want to make use of a European booking center but the majority want service locally in Asia. Standard Chartered Grindlays is committed to staying close to our clients through our office in Hong Kong: we are looking to open in Singapore too.
Jakarta looks to be an exciting private banking market once again. Do you have plans to open an office there too?
We don't have plans at the moment. In every country, there are different legal interpretations of what we can and can't do. We will not jeopardize our strong local franchise in a country by not doing something by the book.
Hunter: We will be careful who we are dealing with in the offshore banking market. We are thus targeting clients the bank has known for a long time, rather than ploughing new furrows. They know us and trust us, and we know them and trust them. They've generated a lot of legitimate wealth and we are in a position to help them. Probably, from that perspective, we are more cautious than some of our competitors.
Devadason: Another way of putting it, is you won't find my people pounding the streets looking for wealthy people. They will be having conversations with onshore relationship managers and corporate bankers to better serve existing clients' needs. Thus we will grow internally, rather than externally.
And how will you benchmark the success of the business?
Hunter: Around 14% of our offshore client base is presently in Asia. But the group's business gains more than 50% from Asia. So if we are to align our offshore business, around the same percentage should come from Asia - which suggests significant growth.
