The changing landscape of private banking in Luxembourg

Transcription

1 Bank of Communications, 5 April 2011 The changing landscape of private banking in Luxembourg Claude Marx, Deputy CEO, HSBC Private Bank (Luxembourg), Private Banker Luxembourg, 19 May

2 Contents 1. Past and present 2. Challenges 3. Opportunities 4. The new PB landscape 2

3 1 past and present

4 Banking in Luxembourg NUMBER OF BANKS 146 banks TOTAL STAFF 26,254 staff

5 Banking in Luxembourg Luxembourg banking profit before tax and provisions PROFIT BEFORE TAX/PROVISIONS ( mio)

6 Private Banking in Luxembourg Key figures: 56 private banks (total number of banks 146) Total AUM 300 billion Total revenues 3.4 billion Contribution to tax revenues 424 million Direct and indirect staff10,000 (total staff in financial sector 26,000) 6

7 Segmentation by geography Assets 17% 19% 19% 45% Luxembourg Belgium, France & Germany Other European countries Other countries (non European) 7

8 Banking services Service level / assets 62% 11% 5% 22% Discretionary Portfolio Management Fee-based Advisory Service (under mandate) Portfolio Management by 3rd Party (excluding funds) Others (Execution Only / Brokerage/ Cash) 8

9 The traditional Luxembourg PB model Protection of privacy Multi currency Estate/tax planning Level of service Product offering Political and economic stability Language skills Solid regulatory framework 9

10 2 challenges

11 Regulation e v o l u t i o n European Savings Directive 1989 AML Rules to come 2009 BASEL II 2007 MiFID Investor Protection Revised Savings Directive Towards automatic exchange of information? BASEL III FATCA G20 Exchange of information in tax matters Since 70s Financial Centre and Private Banking Develop 11

12 Continued pressures on revenue Commission income Increased competition Increased transparency Net interest income Low interest environment to continue 12

13 3 months LIBOR

14 3 months LIBOR forward curve through

15 10 year Bund yield

16 Cost IT, premises Unlikely to decrease Salaries, bonuses Indexation of salaries, collective agreement Labor laws Intra-group charges Unlikely to decrease Regulation, compliance Will increase 16

17 Image issue PB expertise not known General concern Moderate image issue Some EU countries Serious image problem Neighboring countries, some other old European countries Colored lists (actual or threatened) Parts of LATAM, Spain 17

18 Erosion of confidentiality QI, FATCA USA Securities regulations, Company law Taxation Ever increasing list of countries Exchange of information; alternatives Data theft AML List of predicate crimes 18

19 Low customisation Products Segmentation Traditional range Product pushing Traditional by assets and geography Limited behavioral segmentation Risk management MiFID applied mecanically Relationship managers Need for more specialists Need to upskill 19

20 Over dependence on Affluent clients Assets: 27% < 1 mio 42% 9% 9% 9% 100, , , ,000 12% 19% 500,001-1,000,000 1,000,001-5,000,000 5,000,001-15,000,000 > 15,000,000 20

21 Over dependence on Affluent clients Number of clients: 89% < 1 mio 9% 1% 1% 12% 22% 55% 100, , , , ,001-1,000,000 1,000,001-5,000,000 5,000,001-15,000,000 > 15,000,000 21

22 More competition EU Onshore Private Banks Non-EU Offshore Private Banks Family offices, independent asset managers Corporate restructurings and repositioning Repatriation New offering Ties with other business lines Hong Kong Singapore Switzerland Closer to the client Trusted advisor Independence from banks Maybe result of the crisis Focusing on core markets Critical mass 22

23 PIGS, euro 23

24 3 opportunities

25 Total wealth evolution millionaire households Source: Deloitte Development LLC,

26 Nearby markets will remain important Source: Deloitte Development LLC,

27 The 3 pillars of Wealth Planning made in Luxembourg Multicurrency Bank Accounts Transfers/Payments E-Banking Loans and Guarantees BANKING SERVICES Execution Only, Advisory Services Discretionary Asset Management Funds, Fund of Funds, Structured Products All Major Markets and Currencies Structured Products Open Architecture INVESTMENT SERVICES Investment/Real Estate Vehicles Dedicated Funds (SIF) Life Insurance Wrappers Venture Capital vehicles Philanthropy Residency TAX AND ESTATE PLANNING exist in most countries unique to Lux 27

28 Ever growing product range, innovation Foundations Trusts Shariah compliant products 28

29 Unique wealth planning tools; network of highly qualified specialists Personal holding companies (Soparfi) Real estate companies Private equity vehicles Life insurance wrappers Dedicated funds Philanthropic foundation IP regime Residency Fiduciary contracts Specialist service providers (lawyers, accountants, tax advisers) Family office services Fund administration services Large network of double taxation agreements 29

30 The EU Passport Travel Client acquisition Client meetings Road shows, events Products and services Cross border sales Advice Presence Representative office Branch 30

31 Investor protection Deposit guarantee scheme Life insurance policy holder protection Suitability and appropriateness testing Reporting, transparency Strict prudential supervision CSSF as ombudsman 31

32 4 the new PB landscape

33 Consolidation Mergers and acquisitions Portfolio / business sales Reducing multiple presences of the same group Amongst competitor banks Repositioning within the group Development or exit 33

34 Efficiencies Revenue enhancement Tariff and special conditions High added value services Cost control Refocusing Outsourcing Pooling of resources Markets (fewer markets, better penetration) Clients (towards upper segment) 34

35 Enhanced segmentation Classical criteria New criteria AUM shift from affluent to HNWI/UHNWI Geography Lifestyle Age, Gender Occupation 35

36 Typical segmentation model Strategy Focus on semiindustrialized processes Focus on assets under management Focus on highend wealth solutions Commercial Approach Standardized approach Customized relationshipdriven approach Tailor-made solutions Key Offering Characteristics Asset Management with extensive use of funds Product solutions Tax and estate planning Asset allocation Tailored asset management Wealth management Access to capital markets Alternative offerings HSBC Private Bank How we can open doors for you

37 Holistic view of client needs Impeccable quality of service Performance 37

38 Need for clear, Unique Selling Proposition EU Markets Non-EU Markets Strong asset management capabilities Wealth planning toolbox EU Passport Strong asset management capabilities Wealth planning toolbox Luxembourg asset management offering complementary to offering in target country 38

39 Need to communicate USP External communication Group internal communication Traditional channels (roadshows, fairs) New channels (e.g. interviews, articles) Constant need to keep head office informed about Luxembourg advantages Carefully select markets (mix EU/ non-eu) 39

40 Upskilling staff Assessment of competencies Bank tools or external IFBL Train or replace Will / Skill Revised needs Recruitment Group internal External 40

41 Cross border operation Need to review cross border marketing procedures Internal resources External resources Non tax issues Cross border banking regulations, securities regulations (products) Tax compliance Client reporting Legacy issues New business Ensure regular reporting Tax reporting 41

42 Any questions? 42