Dow Jones, Henry E. Teitelbaum, 14 September 2006
London - When HSBC Holdings PLC began building its private banking segment some eight years ago, relationships were still local, accounts were offshore and clients were primarily concerned with safeguarding their wealth.
As chief executive of HSBC Private Bank for the past seven years, Clive Bannister has done more than just witness the changes that have since swept the industry. He has helped to engineer one of the most spectacular growth stories in global private banking.
Bannister, in an interview with Dow Jones Newswires, said that HSBC is now "rather spoiled for choice" as it presses its advantages in the growth markets where it dominates, or in the other countries where it is now competitive.
He also explained how a series of clever moves and at least one lucky break allowed HSBC to grow private banking from modest beginnings into the world's third-largest private bank by assets under management.
"We had a vision for what an international private bank would look like," Bannister said. "And then we went out and either filled in the gaps externally or did an immense amount of organic growth."
In 1998, HSBC had five small private banks employing about 750 people in 10 countries, contributing $80 million to annual pretax profit. Under Bannister's leadership, HSBC Private Bank has increased staff to over 6,000 in 35 countries and 82 locations.
Its contribution to parent company profit will this year top $1 billion for the first time after hitting $612 million in the first half.
To compete with private banking powerhouses UBS AG and Credit Suisse Group, Bannister recognized that HSBC needed to build or acquire something to help it stand out.
"In the first vision statement we put down, we said we wanted to have a world-class trust and tax capability. I looked at our two biggest competitors...and they were not in that space," he said.
The strategy anticipated a major change in the services that wealthy people would seek from private banks, namely a shift to onshore banking.
Bannister explained that while over the past 100 years or so, people looked to offshore private banking as "an environment that could be relied upon" to preserve their wealth, there was now a generation of business school-trained people who demanded easier access to their money.
"They were now building businesses," he said. "They don't want money a million miles away from where they can use it."
At the same time, the global economy has been growing, wealth has reached new corners of the world and Western legal systems have been adopted, reducing the need to keep wealth offshore.
The shift to onshore banking brought with it a new demand for tax advisory services, as well as increased trust management services, Bannister said. Unlike offshore banking, where taxes are determined locally, the relevance of tax issues to wealth management grows dramatically when banking onshore.
"With an onshore relationship," he said, "the first conversation we would have is: 'Well, let's talk your tax position.' It's the biggest way in which you look after your wealth management over time."
In this regard, Bannister says HSBC got lucky when in 2002 accounting firm Arthur Andersen was brought down by the Enron scandal.
"We were building up our tax business in both Asia, Hong Kong and London, and then Arthur Andersen happened and I think you can honestly say that was serendipity."
HSBC was able to buy the tax advisory services of Arthur Andersen, consisting of 25 partners and 180 other staff, at auction for $15 million, and establish HSBC Wealth and Tax Advisory Services.
Another key acquisition for HSBC Private Bank came two years later when it acquired the Bank of Bermuda. Bannister said the move expanded HSBC's presence in the management of trusts - which are another growing requirement of sophisticated onshore clients as they look for legal structures to separate business investments from family savings, organize estates for the next generation or in the event of divorce.
Bannister counts two other acquisitions as important to the growth of HSBC Private Bank over the past eight years, including the $9.7 billion purchase in 1999 of Republic Bank of New York in 1999, and the $11 billion acquisition of Credit Commercial de France in 2000, which brought not only private banking customers, but a presence and expertise in asset management.
Taken together with HSBC's global presence and strong capital base, Bannister said the private bank's expanded capabilities have allowed it to tap fast-growing demand for wealth-related services in developing economies, notably in Asia, the Middle East and in Latin America.
HSBC's existing traction in these markets has served the private bank well as global wealth and trade has expanded, Bannister said, allowing HSBC Private Bank to provide a widening range of services to a growing Diaspora of wealthy people and their families across the globe.
More generally, Bannister describes HSBC's global presence as of "inestimable advantage" in assisting customers.
"I don't think our internationalism is bolted on," he said. "I think it's rather built into the DNA."
And it is producing some rather novel services.
For example, HSBC is now providing immigration services to clients that begin with the client making an investment in the destination country and ultimately leads to the granting of citizenship.
"It started in Canada, and now we do it in other jurisdictions," Bannister said, notably in the U.K. and Hong Kong. "I think it shows an empathy with a customer group because you're talking about some very personal, intimate things." HSBC Private Bank plans to officially launch in Canada in the fourth quarter of this year.
HSBC Private Bank has also innovated services such as World Vision to help clients and their families consolidate financial information from multiple financial institutions, across asset classes and currencies into a single statement account.
Bannister said he is "enormously confident" of HSBC Private Bank's position in the context of continued growth in wealth management services globally, and in his designated successor, Christopher Meares, who runs HSBC Private Bank's businesses in the U.K., Channel Islands and Luxembourg, will take over from him in March 2007.
For his part, Bannister will transition to a new role running HSBC's insurance business.
In terms of HSBC Private Bank's expansion, Bannister hinted that the U.S. might be a priority going forward.
"America is still half of the world's wealth. It is an enormously wealthy country and we are underrepresented there as a private bank," he said.
But Bannister said Asia is also a natural place for private banking to expand due to HSBC's history, which began there, and its outsized footprint in the region.
He said HSBC also sees great opportunities in Latin America and in Europe, where in addition to the wealth emerging in eastern and central Europe, there are generational issues in an aging western European population.
;
London - When HSBC Holdings PLC began building its private banking segment some eight years ago, relationships were still local, accounts were offshore and clients were primarily concerned with safeguarding their wealth.
As chief executive of HSBC Private Bank for the past seven years, Clive Bannister has done more than just witness the changes that have since swept the industry. He has helped to engineer one of the most spectacular growth stories in global private banking.
Bannister, in an interview with Dow Jones Newswires, said that HSBC is now "rather spoiled for choice" as it presses its advantages in the growth markets where it dominates, or in the other countries where it is now competitive.
He also explained how a series of clever moves and at least one lucky break allowed HSBC to grow private banking from modest beginnings into the world's third-largest private bank by assets under management.
"We had a vision for what an international private bank would look like," Bannister said. "And then we went out and either filled in the gaps externally or did an immense amount of organic growth."
In 1998, HSBC had five small private banks employing about 750 people in 10 countries, contributing $80 million to annual pretax profit. Under Bannister's leadership, HSBC Private Bank has increased staff to over 6,000 in 35 countries and 82 locations.
Its contribution to parent company profit will this year top $1 billion for the first time after hitting $612 million in the first half.
To compete with private banking powerhouses UBS AG and Credit Suisse Group, Bannister recognized that HSBC needed to build or acquire something to help it stand out.
"In the first vision statement we put down, we said we wanted to have a world-class trust and tax capability. I looked at our two biggest competitors...and they were not in that space," he said.
The strategy anticipated a major change in the services that wealthy people would seek from private banks, namely a shift to onshore banking.
Bannister explained that while over the past 100 years or so, people looked to offshore private banking as "an environment that could be relied upon" to preserve their wealth, there was now a generation of business school-trained people who demanded easier access to their money.
"They were now building businesses," he said. "They don't want money a million miles away from where they can use it."
At the same time, the global economy has been growing, wealth has reached new corners of the world and Western legal systems have been adopted, reducing the need to keep wealth offshore.
The shift to onshore banking brought with it a new demand for tax advisory services, as well as increased trust management services, Bannister said. Unlike offshore banking, where taxes are determined locally, the relevance of tax issues to wealth management grows dramatically when banking onshore.
"With an onshore relationship," he said, "the first conversation we would have is: 'Well, let's talk your tax position.' It's the biggest way in which you look after your wealth management over time."
In this regard, Bannister says HSBC got lucky when in 2002 accounting firm Arthur Andersen was brought down by the Enron scandal.
"We were building up our tax business in both Asia, Hong Kong and London, and then Arthur Andersen happened and I think you can honestly say that was serendipity."
HSBC was able to buy the tax advisory services of Arthur Andersen, consisting of 25 partners and 180 other staff, at auction for $15 million, and establish HSBC Wealth and Tax Advisory Services.
Another key acquisition for HSBC Private Bank came two years later when it acquired the Bank of Bermuda. Bannister said the move expanded HSBC's presence in the management of trusts - which are another growing requirement of sophisticated onshore clients as they look for legal structures to separate business investments from family savings, organize estates for the next generation or in the event of divorce.
Bannister counts two other acquisitions as important to the growth of HSBC Private Bank over the past eight years, including the $9.7 billion purchase in 1999 of Republic Bank of New York in 1999, and the $11 billion acquisition of Credit Commercial de France in 2000, which brought not only private banking customers, but a presence and expertise in asset management.
Taken together with HSBC's global presence and strong capital base, Bannister said the private bank's expanded capabilities have allowed it to tap fast-growing demand for wealth-related services in developing economies, notably in Asia, the Middle East and in Latin America.
HSBC's existing traction in these markets has served the private bank well as global wealth and trade has expanded, Bannister said, allowing HSBC Private Bank to provide a widening range of services to a growing Diaspora of wealthy people and their families across the globe.
More generally, Bannister describes HSBC's global presence as of "inestimable advantage" in assisting customers.
"I don't think our internationalism is bolted on," he said. "I think it's rather built into the DNA."
And it is producing some rather novel services.
For example, HSBC is now providing immigration services to clients that begin with the client making an investment in the destination country and ultimately leads to the granting of citizenship.
"It started in Canada, and now we do it in other jurisdictions," Bannister said, notably in the U.K. and Hong Kong. "I think it shows an empathy with a customer group because you're talking about some very personal, intimate things." HSBC Private Bank plans to officially launch in Canada in the fourth quarter of this year.
HSBC Private Bank has also innovated services such as World Vision to help clients and their families consolidate financial information from multiple financial institutions, across asset classes and currencies into a single statement account.
Bannister said he is "enormously confident" of HSBC Private Bank's position in the context of continued growth in wealth management services globally, and in his designated successor, Christopher Meares, who runs HSBC Private Bank's businesses in the U.K., Channel Islands and Luxembourg, will take over from him in March 2007.
For his part, Bannister will transition to a new role running HSBC's insurance business.
In terms of HSBC Private Bank's expansion, Bannister hinted that the U.S. might be a priority going forward.
"America is still half of the world's wealth. It is an enormously wealthy country and we are underrepresented there as a private bank," he said.
But Bannister said Asia is also a natural place for private banking to expand due to HSBC's history, which began there, and its outsized footprint in the region.
He said HSBC also sees great opportunities in Latin America and in Europe, where in addition to the wealth emerging in eastern and central Europe, there are generational issues in an aging western European population.
