Private Banking

2. Table of Contents
LIST OF TABLES & FIGURES ..............................................................................................................................2
EXECUTIVE SUMMARY.........................................................................................................................................3
1. Characteristics of the private banking markets...........................................................................................4
1.1. The wealth pyramid .................................................................................................................................4
1.2. KPIs of the private banking ....................................................................................................................4
1.3. Evolution of regulation.............................................................................................................................5
1.4. Top 5 global private banks......................................................................................................................6
2. JP Morgan Private Bank ..................................................................................................................................6
2.1. Products & services..................................................................................................................................7
2.2. Financial performance .............................................................................................................................7
2.2.1. Highlights in performance of JPM...................................................................................................8
2.2.2. Highlights in performance of JPM’s Asset Management..............................................................9
2.2.3. Highlights in performance of JPM’s Private Bank .........................................................................9
2.3. Past & future strategies........................................................................................................................ 12
REFERENCES...................................................................................................................................................... 15

3. LIST OF TABLES & FIGURES
Figure 1: Global wealth pyramid in 2015..............................................................................................4
Figure 2: KPIs of global private banking 2015.....................................................................................5
Figure 3: CIR from 2013 to 2015...........................................................................................................5
Figure 4: Top 5 & Top 25 of Private banking market .........................................................................6
Table 1: Financial indicators of JPM in FY2016....................................................................................8
Table 2: Financial indicators of JPM’s Asset Management in FY2016...............................................9
Table 3: Client assets & AUM of JPM’s Private Bank in FY2016 ..................................................... 10
Table 4: Top 5 Private banks worldwide by AUM............................................................................. 11
Figure 7: Temporary headwinds & two strategies to enhance pre-tax margin............................ 13

4. EXECUTIVE SUMMARY
Private banking is in principle considered as banking activities which offer personalised services (e.g.,
planning real estate scheme, providing financial advice, offering credit, managing investment
portfolio, paying bills, etc.) to HNWI (i.e., higher net worth customer). Private bank has been
increasing its importance as a business line for large & diversified banks; and a source of additional
fee income.
The main objective of this report is evaluating the recent performance of a JP Morgan Private Bank.
JPMorgan Chase & Co. (NYSE: JPM) which is one of the leading global financial services providers (in
lots of different areas, e.g., corporate & investment banking, financial transaction processing & asset
management). JPM’s Asset Management having the client assets of $2,400b, is a global leader &
consists three client segments which are: (i) private banking clients, (ii) institutional clients & (iii)
retail clients. At the end of 2015, JPM’s private bank ranked the third globally with the AUM of
$1,430b.
To achieving the objective, the report will assess two main issues, which are:
- The characteristics of the private banking markets (i.e., the wealth pyramid, KPIs of private
banking, the evolution of regulation & current top 5 private banks) (in part 1)
- JP Morgan Private Bank’s performance (i.e., offered products & services, financial
performance & strategies) (in part 2).

5. 1. Characteristics of the private banking markets
1.1. The wealth pyramid
Private banking is in principle considered as banking activities which offer personalised services (e.g.,
planning real estate scheme, providing financial advice, offering credit, managing investment
portfolio, paying bills, etc.) to HNWI (i.e., higher net worth customer) (FFIEC, 2017). Whereas, HNWI
segment is at the top of the wealth pyramid as visualised in Figure 1.
Figure 1: Global wealth pyramid in 2015
Source: Ernst & Young (2016)
At globe scale in 2015, the wealth pyramid implies the disparity among wealth segments. Specifically,
HNWI segment – the targeted customers of private banking, with the level of investable assets higher
than $1m, accounted for only 0.7 percent of the world’s adult population. However, HNWI segment
owned up to 45.2 percent of investable wealth, equivalent to $112,900b. In the other hand, the base
level with the investable assets less than $0.01m, accounted for 71 percent of the world’s population
& owned only 3 percent of investable wealth, equivalent to $7,400b.
1.2. KPIs of the private banking
According to the Global Private Banking Benchmark 2016 Report – issued by Scorpio Partnership, the
performance in 2015 of global private banking industry was evaluated via four indicators: (i) AUM
(i.e., asset under management), (ii) Net new money, (iii) Operating profits & (iv) Client engagement
score – with the year-on-year movement visualised as in Figure 2.

6. Figure 2: KPIs of global private banking 2015
-1.0% -6.9% +0.6% +1.0%
yoy
AUM
yoy
Net new
yoy
Operating
yoy Client
engagement
money profits
score
Source: Caproasia.com (2016)
Among four indicators, only the later two indicators – operating profits & client engagement score,
showed improvements in 2015 (+0.6 percent & +1.0 percent yoy, respectively). The +0.6 percent
yoy enhancement in profitability, regardless of a decline of 1.0 percent in AUM, was mainly due to the
reduction in CIR (cost - income ratio) from 81.4 percent to 80.0 percent, visualised as in the following
figure.
Figure 3: CIR from 2013 to 2015
Source: Caproasia.com (2016)
1.3. Evolution of regulation
According to Ernst & Young (2015), following the global financial crisis, both the regulator &
government have been motivated to impose tighter oversight & regulation over financial services in a
more rapid manner. Specifically, the focuses of enhancement in regulation are (i) protecting investors
& (ii) questioning whether recommendations made by the investment managers & financial advisors
bring the clients’ best interest.
According to Peter (2015), three key regulations influencing the wealth management sector are:
 Markets in Financial Instruments Directive (MIFID II): This framework targets the
improvement in protecting investors & transparency; thus, a more efficient & robust market
structure is expected. Due to the regulation, financial institutions must review the business
model & pricing structure; thus, wealth management & private banking in particular are
expected to be considerably impacted. A notably major influence on advisory services of
private banking is that the clients will be the ones to choose the way to be advised –
independently or dependently.

7.  Alternative Investment Fund Managers Directive (AIFMD): This EU-specific regulation also
targets the improvement in protecting investors, more effective monitoring, preventing
systemic risk & eliminating disorderly market. The eligible organisations regulated by this
document are AIFM (i.e., alternative investment fund manager), hedge fund, private equity
fund, etc.

 Foreign Account Tax Compliance Act (FATCA): Being effective since 2014 & influencing
considerably on both the global wealth management sector & US taxpayers. The main
objective of FATCA is increasing tax compliance by US taxpayers having overseas financial
assets. Strict penalties will be taken in the cases of non-compliance.
1.4. Top 5 global private banks
According to Caproasia.com (2016), the top 5 private banks at globe scale at the end of 2015 are:
1. UBS with the AUM of $1,730b
2. Bank of America Merrill Lynch with the AUM of $1,440b
3. Morgan Stanley with the AUM of $1,430b
4. Credit Suisse with the AUM of $687b
5. Royal Bank of Canada with the AUM of $620b
Whereas, the total amount $5,900b of Top 5’s AUM accounted for 30.3 percent of total private
banking market. The proportion of Top 25 is 56.3 percent, equivalent to $11,000b. In comparison to
2014, the total private banking market was skrunk by 3.0 percent, from $20,200b in 2014 to $19,600
in 2015.
Figure 4: Top 5 & Top 25 of Private banking market
Source: Caproasia.com (2016)
2. JP Morgan Private Bank
JPMorgan Chase & Co. (NYSE: JPM) which is one of the leading global financial services providers (in
lots of different areas, e.g., corporate & investment banking, financial transaction processing & asset
management) (Am.jpmorgan.com, 2016c). JPM’s Asset Management having the client assets of

8. $2,400b, is a global leader & consists three client segments which are: (i) private banking clients, (ii)
institutional clients & (iii) retail clients. Whereas, private banking clients consist of HNWI, high-net-
worth families / money managers / employers / etc. At the end of 2015, JPM’s private bank ranked
the third globally with the AUM of $1,430b. In the next parts, the products, financial performance &
strategy of JPM’s Private Bank will be discussed.
2.1. Products & services
According to FFIEC (2017), typically offered private banking products & services are: (i) Cash
management; (ii) Funds transfer; (iii) Asset management; (iv) Facilitation of shell firms & offshore
entities; (v) Lending services; (vi) Financial planning services; (vii) Custody services; & etc. Whereas,
privacy & confidentiality are two essential factors in private banking. At JPM’s Private Bank, all of
those typical products and services are offered & summarised under four main categories, which are:
(i) Wealth planning, (ii) Investing, (iii) Credit & (iv) Banking (Am.jpmorgan.com, 2017b):
 Wealth planning – Slogan: "Your Vision, Our Experience"
JPM’s Private Bank assists the customers to evaluate opportunities, together with providing guidances
to enlarge & preserve wealth for envision now & in the future.
 Investing – Slogan: "Your Vision, Our Investment Insights"
Given the clients as leading companies, JPM’s Private Bank will be the honest & helpful partner to
manage investments according to the customers’ vision. The investments are diversified across all
assets (e.g., equity, fixed-income, currency, commodity, etc.)
 Credit – Slogan: "Integrating a Borrowing Strategy into Your Financial Plans"
In order to assist customers to accomplish wide-ranging financial targets, efficient credit strategies
will be assessed & advised by JPM’s Private Bank after thoroughly evaluating both sides of customers’
personal balance sheet.
 Banking – Slogan: "Personal Attention for Your Daily Banking"
Outstanding personal services are also offered by JPM’s Private Bank. The expected services are all of
day-to-day checking, savings, credit & debit card transactions. All of those transactions will be
carefully monitored by financial services professionals at JPM’s Private Bank. The bank’s dedicated
personnel is familiar with customers’ investment accounts & investment preferences.
2.2. Financial performance
The review in financial performance aspect will start with highlighting the results of the whole JPM,
then Asset Management business line & Private Bank segment.

9. 2.2.1. Highlights in performance of JPM
Overall, the performance of JPM in FY2016 was strong across all businesses & clearly reflected the
intense client focus. Thus, the market shares were enhanced in all businesses. With newly effective
product introduced, JPM deepened the bank’s relationship with US households & achieved high
customer satisfaction score. Especially, in Asset Management business, loans & deposits grew
positively given the competitive environment. Some highlights of the bank’s performance in 2016 are
as follows:
Table 1: Financial indicators of JPM in FY2016
Source: Am.jpmorgan.com (2017d)
Net revenue on managed basis was $23.4b, $24.7b, & $22.9b for 4Q16 (i.e., the fourth quarter of
2016), 3Q16, & 4Q15, respectively. Thus, the performance of JPM’s net revenue – managed in 4Q16, was
+2 percent better than 4Q15; however, 5 percent worse than 3Q16. On a full year basis, net revenue –
managed, was $99.1b in FY2016, +2.6 percent (equivalent to $2.5b) better than FY2015.
Net income was $6.7b for 4Q16 was +7 percent better than 3Q16, and even 24 percent better than
4Q15. On a full year basis, net income was $24.7b in FY2016, +1.2 percent (equivalent to $0.3b)
better than FY2015.
The EPS of JPM for FY2016 was $6.19; thus, $0.19 higher than the level of FY2015 $6.00. Although
on quarterly basis, most updated ROE (i.e., for 4Q16) (11 percent) was better than the level of 3Q16
(10 percent) and of 4Q15 (9 percent); on yearly basis, the ROE of FY2016 was only 10 percent, lower
than the level of 11 percent in FY2015.

10. 2.2.2. Highlights in performance of JPM’s Asset Management
Table 2: Financial indicators of JPM’s Asset Management in FY2016
Source: Am.jpmorgan.com (2017d)
Overall, Asset Management business line gained strong results in 2016 given weaker markets & more
competitive industry. Revenue was $3.1b higher than both the levels of 3Q16 & 4Q15, indicating
strong results thanks to higher deposit spread & positive loan growth. Net income was $0.59b for
4Q16 was better than both 3Q16 (+0.03b) & 4Q15 (+$0.08b). AUM was $1,800b, increased by 3
percent yoy, indicating net inflow into liquidity & long term products, & higher market level.
Especially, 80 percent of mutual fund AUM was in the first and second quartiles over five-year period.
Client assets was $2,500b, increased by 4 percent yoy. The profitability of Asset Management on
average was significantly higher than the bank as a whole, indicated by the ROE of 25 percent for
4Q16 in comparison to 11 percent of JPM.
2.2.3. Highlights in performance of JPM’s Private Bank
According to FFIEC. (2017), private banking activities are offered for both domestic & overseas
customers. In general, private banking activities thresholds depend on (i) the level of AUM (i.e.,
assets under management) & (ii) specific needs for products / services (e.g., managing real estate,
company oversight, managing money, etc.). Accordingly, the charged fees will be assessed through
the asset thresholds & used products / services.
Being a segment of Asset Management business line, the contribution of Private Bank segment in
FY2016 to the Asset Management is as follows:

11. Table 3: Client assets & AUM of JPM’s Private Bank in FY2016
Source: Am.jpmorgan.com (2017d)
Among three client segments in Asset Management, Private Banking accounted for the least
proportion of total AUM (25 percent in FY2016) & was stable compared to FY2015 (also 25 percent).
Over one year, the level of AUM of Private Banking slightly decreased by 0.5 percent. In term of
client assets, Private Banking accounted for the largest proportion of 45 percent in both FY2015 &
FY2016. The movement in FY2016 was an increase by 4.6 percent. According to the bank’s
projection, the UHNW (i.e., ultra high net worth: $100mm+) segment in the industry private wealth
will grow the fastest with the projected 2014 – 2019 CAGR of 12 percent (visualised as in Figure 5).
Thus, there will be more than a half of JPM’s Private Banking client assets in total client assets
(FY2016: 45 percent) (visualised as in Figure 5).
Figure 5: JPMorgan in different regions
Source: Am.jpmorgan.com (2016e)

12. Figure 6: Client asset CAGR, Market share & Productivity of JPM’s Private Bank
Source: Am.jpmorgan.com (2016e)
In four markets which JPM’s Private Bank has presence, the bank always grew significantly higher
than the industry average (visualised as in Figure 6). Especially, in North America, the 2006 – 2014
CAGR of client assets of JPM’s Private Bank was 10 percent compared to the industry level of 5
percent & the holding market share was 4 percent. In term of the profitability measured by the 2015
revenue per client advisor, JPM’s Private Bank also ranked the first with the level of $2.25mm, slightly
higher thaan the immediate follower (Peer 1) of $2.18mm & far higher than the competitors ranked
the 3
rd
, 4
th
, 5
th
& 6
th
.
Table 4: Top 5 Private banks worldwide by AUM
Source: Caproasia.com (2016)
According to Caproasia.com (2016), the total amount $5,900b of Top 5’s AUM accounted for 30.3
percent of total private banking market. The top 5 private banks at globe scale at the end of 2015
are: (i) UBS; (ii) Bank of America Merrill Lynch; (iii) Morgan Stanley; (iv) Credit Suisse & (v) Royal
Bank of Canada. Whereas, JPM’s Private Bank ranked the third in FY2015 & ranked the second in

13. FY2014. In FY2015, the AUM of all Top 5 was declined with negative growth rates (JPM’s Private
Bank: -2.8 percent). The banks with lower ranking (i.e., higher position in the Top) decreased AUM at
lower rate.
2.3. Past & future strategies
In this part, the past and future strategies of JPM’s Asset Management as a whole will be discussed,
especially those are applicable for Private Banking segment.
JPM’s Asset Management has been uniquely positioned in the industry & achieved strong financial
results (Am.jpmorgan.com, 2016e):
• Always in the top of investment performance:
o Unmatched number of 4/5-star funds
o The retention rate of more than 95 percent for senior Portfolio Manager talents
• Having a diversified global client base
o Having the clients accounting for 60 percent of the largest pension funds, sovereign
wealth funds, & central banks globally.
o Serving a wide range of wealth spectrum (i.e., from retail investor to multi-billionaire)
• Breadth & depth of offering
o Diversifying uniquely the asset classes & client channels globally.
o Continually offering new products which match with the customers’ needs & the
quickly changing of the market.
According to Am.jpmorgan.com (2016e), the materially temporary headwinds of bank’s asset
management business are (i) controls uplift, (ii) account remediation, & (iii) low rates. The primary
consequence of those headwinds is the pressure to lower the pre-tax margin. The margin was 31
percent in 2010, lowering to 27 percent in 2015, & targeted to be 30 percent + in 2018.
The target of levering up the pre-tax margin will be achieved through implementing two
strategies which are: (i) levelling off expenses relating to control, operation and tech production & (ii)
continuing investment in growth via increase tech initiatives & front office headcount (visualised as in
Figure 7).

14. Figure 7: Temporary headwinds & two strategies to enhance pre-tax margin
Source: Am.jpmorgan.com (2016e)
During six years from 2010 to 2015, the pre-tax margin was lower from 31 percent in 2010 to 27
percent in 2015. The main contribution was due to the adverse impacts of the global financial crisis.
During the period, the controls, operation & tech production expenses increased by 130 percent, 30
percent & 10 percent respectively. The first strategy of levelling off expenses is keeping & even
cutting down the three above costs at its current level. Especially, the cost for tech production is
required to be cut down.
In the six-year period, the investment in tech initiatives increased by 30 percent & the front
headcount increased by 500 people. In the next three year, to gain a higher pre-tax margin of 30
percent +, JPM will still invest in growth; however, the bank will focus more on investing in tech
initiatives (will increase 70 percent / 3 years, compared to increased 30 percent / 6 years) & remain
the growth pace of investing in front office headcount (will increase 250 people / 3 years, compared
to increased 500 people / 6 years).
The discussion up to now is about quantity, the next part will discuss about (i) people management &
leadership; and (ii) risk management & controls in a more qualitative approach.
At JPM, people management & leadership have been implemented on some key talent initiatives,
which are (Am.jpmorgan.com, 2016e):

15. • Achieving effective retention rate (e.g., 95 percent of top talent)
• Continuing talent investment through actively enhancing mobility (e.g., there were nearly
1,500 employees internally transferred in 2015)
• Continuing sponsorship & supporting Re-Entry program.
At JPM, the risk management & strong control strategies consist of (Am.jpmorgan.com, 2016e):
• Increasing overall controls-related spending (e.g., adding more than 650 new employees &
continuing technological investment).
• Evaluating culture & conducts via adopting firm-wide standards.
• Implementing globally consistent standard in term of fiduciary obligation.
• Implementing effectively the 1
st
stage of Volcker rules for covered funds

16. REFERENCES
Am.jpmorgan.com. (2017a). J.P. Morgan Private Bank – Global Wealth Management. [online]
Available at: https://am.jpmorgan.com/private-bank/public/gl/en/home [Accessed 15 Feb. 2017].
Am.jpmorgan.com. (2017b). J.P. Morgan Private Bank – Our capabilities. [online] Available at:
https://am.jpmorgan.com/private-bank/public/gl/en/our-capabilities [Accessed 15 Feb. 2017].
Am.jpmorgan.com, (2016c). Annual report 2015 [online] Jpmorganchase.com. Available at:
https://www.jpmorganchase.com/corporate/investor-relations/document/2015-annualreport.pdf
[Accessed 17 Feb. 2017].
Am.jpmorgan.com, (2017d). 4Q16 Earnings press release [online] Jpmorganchase.com. Available at:
https://www.jpmorganchase.com/corporate/investor-
relations/document/4Q16_Earnings_Press_Release.pdf [Accessed 17 Feb. 2017].
Am.jpmorgan.com, (2016e). Assest management [online] Jpmorganchase.com. Available at:
https://www.jpmorganchase.com/corporate/investor-
relations/document/am_investor_day_2016.pdf [Accessed 17 Feb. 2017].
Caproasia.com (2016). 2016 Global Private Banking Report | Caproasia Online. [online]
Caproasia.com. Available at: http://www.caproasia.com/2016/07/16/2016-global-private-
banking-report-scorpio-partnership/ [Accessed 20 Feb. 2017].
Ernst & Young, (2015). Winds of change: Wealth management reimagined [online] Ey.com. Available
at:
http://www.ey.com/Publication/vwLUAssets/Winds_of_change:_Wealth_management_reimagined/%
24FILE/EY-winds-of-change-wealth-management-reimagined.pdf [Accessed 17 Feb. 2017].
FFIEC. (2017). Private Banking—Overview [online] Ffiec.gov. Available at:
https://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_081.htm [Accessed 17 Feb. 2017].
Peter Ipkovich, A. (2015). Which regulations will impact private banking?. [online] Pwmnet.com.
Available at: http://www.pwmnet.com/Regulation/Which-regulations-will-impact-private-banking
[Accessed 17 Feb. 2017].

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