Asian Private Banker Magazine Sneak Peak

1. MAY 2015 • ISSUE 87 Independent, Authoritative, Indispensable
ASIAN PRIVATE BANKER
CROW’S NEST
THE FIRST BREAKDOWN OF PRIVATE
BANK REVENUE STREAMS IN ASIA
TECHNOLOGY SPECIAL
THE DIGITAL REVIVAL OF
PRIVATE BANKING
GOING, GOING, GONE...
RBS LOSES ITS CROWN JEWEL -
THE SAGA OF COUTTS
THE SCOOP
WHY
MICHEL LONGHINI
SHOULD ASK
KAVEN LEUNG
TO LUNCH...

2. CONTENTS
4
Letter from the Editor
6
Crow’s Nest: The first breakdown of private bank revenue streams in Asia
8
Technology: The digital revival of private banking
16
Structured products leaderboard
What’s selling at private banks
17
The Scoop with Shruti Advani: Why Michel Longhini should ask Kaven Leung to lunch
18
Going, going, gone – the sale of Coutts
19
Fixed income: Fed hike? What Fed hike?
20
Mapping the market: Asia’s wealthy keep growing
22
Movers and shakers: Tracking people moves
PUBLISHER
Andrew Shale
EDITOR
Shruti Advani
EDITORIAL
Philip Macdonald, Richard Otsuki,
Priyanka Boghani, Fergus Herries
MANAGING DIRECTOR
Paris Shepherd
OPERATIONS
Benjamin Yang
DIRECTOR OF BUSINESS DEVELOPMENT
Madhuri Chatterjee
BUSINESS DEVELOPMENT MANAGER
Sonia Lam
EVENTS MANAGER
Sam Chan
DESIGN
Tommy Chong
PRODUCTION
Jump Web Services Ltd.
ISSN NO. 2076-5320
Printed on FSC Condat Matt Perigord paper
PUBLISHED BY KEY POSITIONING LIMITED
1205 The Dominion Centre, 43-49 Queen’s Road East, Wanchai, Hong Kong
Tel: +852 2529 5577 Fax: +852 2529 0077 Email: info@asianprivatebanker.com
MAY 2015
3 asian private banker

3. I
t doesn’t matter where you are, you are nowhere compared
to where you can go, was the war cry at Asian Private Banker
for the first quarter of this year, and it led to this issue you
hold today. I won’t say we’re “bigger and better” or “new and
improved.” The truth is, we’re continuing to do what we do
best - provide independent and in-depth coverage of the issues fac-
ing the private banking industry in Asia. We’re simply doing more of
it - more data points in our articles to help decision-makers, more
coverage of cutting-edge products as soon as they are market-ready,
and more perspectives from the people who matter.
It is only fitting that our cover story should tackle change in an area
that is mission critical to all private banks - 50% of the private banks
we surveyed spend over US$60 million on technology in Asia. A full
100% of the banks surveyed are increasing their spend on technolo-
gy. Even so, innovation and regulation are outpacing spend - how
then do banks decide where to spend these dollars? The more inno-
vative are beginning to “spend where they earn”, focussing resources
on front-end, client-facing technology. As a result, several platforms
providing multiple products at multiple prices have become strong
enablers of a bank’s success and a client satisfaction. We talk to those
at the forefront of this revolution.
For those of you I have met before, it should come as little sur-
prise that every time you make a suggestion, it is keenly debated at our
weekly editorial meetings. For the uninitiated, join the debate by mail-
ing your comments to editor@asianprivatebanker.com. I look forward
to hearing from you.
If you allow it to move you, the spirit of
continuous improvement - Kaizen - can propel
you to ever-greater heights.
Shruti Advani
Editor
Asian Private Banker
LETTER FROM THE EDITOR
4 asian private banker

4. EDITORIAL
asian private banker 7
Three private banks have educational
platforms in Asia. These cover 1,912 RMs out
of a total 5,449 – or 35% of the industry
DPM is still a poor performer relative to
structured products (15.4% of total 2014
aggregate revenue)
with aggressive intermediary sales growth over the past three years
include Matthews Asia, M&G, Neuberger Berman, Capital Inter-
national and Wellington.
STRUCTURED PRODUCTS, FROM
THE ASHES…
I remember when we opened the door at Asian Private Banker
and started visiting all our friends in structured product sales at
the investment banks. Some of those visits were about as much fun
as a daytrip to the morgue. Over the next three years, from 2010 to
2013, we witnessed a mass exodus of investment bank structured
products teams and noted industry stalwarts as fees collapsed,
technology disrupted, and increased regulatory requirements took
a heavy toll.
However, our six private bank interviews now reveal structured
products’ contribution to revenue has witnessed steady growth of
12.0% since its nadir in 2012. It is fair to say that the heady days of
2007, when structured products accounted for a whopping 30% of
revenue for some private banks, may not be witnessed again. How-
ever, with incumbent leaner teams and expanding product rang-
es - not to mention insatiable client appetite for flow favourites
such as the accumulator - this revenue stream looks set to enjoy
an even more impressive 2015. As I write the Hang Seng has risen
566 points (2.09%) and stands at 27,662. Gulp.
2014

5. Digital budgets booming
TECHNOLOGY SPECIAL - INTERNAL
12 asian private banker
A
significant pool of capital is flooding into the private
banking market for technology expenditure as a re-
sult of budget increases. According to an Asian Pri-
vate Banker survey, 50% of the private banks surveyed
spend over US$60 million on technology in Asia.
TRIAL AND ERROR
While banks are still shelling out 40% of their budgets on core
operating systems, according to Asian Private Banker’s estimates,
the remaining 60% is distributed across different parts of the bank’s
operations.
However, at present, private banks are at a trial-and-error stage
about where to reallocate their budgets. “The biggest conundrum
the private banking industry faces is how to segment the technolo-
gy spent in the bank - should it be on the client delivery channels
or on the product distribution?” asks Venkatesh Narasiah, chief op-
erating officer, Asia Pacific, Deutsche Asset & Wealth Management.
Adding to their woes is the changing regulatory landscape in
Asia. “The biggest trend we are seeing is regulatory and compliance
changes, and clients are looking for customer experience; however,
banks are struggling with more than 50% of their technology bud-
gets dedicated to just running the bank and sustaining the status
quo,” says Peter Scott, general manager, Avaloq. This trend is re-
flected in Deutsche Asset & Wealth Management’s recent technolo-
gy strategy. “Over the past few years, a large part of the technology
budget at Deutsche Bank has been invested in risk management to
meet regulatory requirements, and this is an industry-wide trend,”
says Narasiah.
About 30% of a bank’s technology budget is rebalanced and
allocated to its private bank, according to Divyesh Vithlani, a
former Credit Suisse group technology chief operating officer.
Vithlani says that this is a significant shift from five years ago,
prompting him to ask: “Are banks spending enough? Yes. Are
banks spending wisely? No.”
With revenues strained, private banks in Asia are undergoing a digital
transformation with the aim of increasing efficiency and driving down costs
TECH BUDGET INCREASES AT
PRIVATE BANKS