As Thiam rolls in, investors fear Credit Suisse late to Asia wealth party

[October 22, 2015]  By Lawrence White and Joshua Franklin

HONG KONG/ZURICH (Reuters) - Credit Suisse's plan to offset sliding investment banking business by becoming an advisor of choice to Asia's fabulously wealthy could leave new chief Tidjane Thiam arriving late at an overcrowded, overhyped party, investors fear.

The push to expand Asian wealth management announced by the Swiss lender on Wednesday will see it target the fastest-growing private banking sector in the world. Thiam's choice will also tip his bank into cut-throat competition for canny self-made millionaires used to spreading riches around banks - bringing thinner margins rather than fat profits for institutions.

In an early test for the newly appointed Thiam, the move will bring Credit Suisse head-to-head against cross-town rival UBS AG, dominant in banking for Asia's high net-worth individuals. A host of rising Asian players also await, including Chinese banks and savvy regional lenders such as Singapore's DBS Group Holdings Ltd.

"Asia is one of the top priorities for Credit Suisse but everyone is talking the same, more or less," said an official at one of the bank's top 20 investors. "What we are looking for is how Credit Suisse will differentiate its strategy within the Asian market to make this growth plan credible," said the official, who declined to be identified.

The competition is reflected in profit margins from wealth management - 20 basis points in the Asia Pacific region, compared with 34 basis points in the United States and 25 basis points in Western Europe, according to consultancy McKinsey & Co.

Switzerland's wealth managers have long courted Asia's super-rich amid slowing growth at home and an international crackdown on its bank secrecy rules that has made the country a less attractive place to keep cash.

Yet Asia's wealthy tend to spread their money among several banks, more than in other regions, private bankers say. As self-made millionaires - and billionaires - rather than inheritors of fortunes, they also tend to take a more active role in managing their wealth, pitching one bank against another to get the best deal, these bankers say.

A spokeswoman for Credit Suisse in Hong Kong said that the bank has already made progress in boosting its private banking business in Asia.

Assets under management in that segment have risen to 140 billion Swiss francs ($146 billion) in 2014 from 80 billion francs in 2011, with client advisors up to 524 from 400. Credit Suisse will invest a further 700 million francs in Asia Pacific in the next three years, Thiam said on Wednesday.

DECELERATION FEAR

Having launched its push into wealth management in Asia back in 2011, UBS managed about $272 billion in 2014, almost double Credit Suisse's Asia-Pacific wealth business. UBS has more than twice as many private wealth bankers as any other rival.

Stoking the drive for wealth managers to step up their Asian footprint, Asia excluding Japan is forecast to double its net millionaire wealth to $17.7 trillion by 2018, according to McKinsey.

In recent years, Julius Baer has bought Merrill Lynch's wealth management business outside of the United States, while Union Bancaire Privee has snapped up Coutts International. Both purchases helped the banks beef up their presence in Asia.

Yet investors and analysts are wary of deceleration in the private wealth management business.

Deutsche Bank analyst Matt Spick wrote last month that the emerging market economic slowdown, triggered by fears over the continued strength of China's economy, could dampen the pace of net new money growth for two years.

"Asia's growth in the next five years may be not so good as it was over the last five years," said an official at another top-20 investor in Credit Suisse, again speaking on condition of anonymity.

Thiam has a track record for expanding Asian business, having managed his previous employer Prudential Plc's successful expansion in the region. Yet doubts linger about whether that success can be replicated at Credit Suisse.

"The markets probably think those are the right ideas but will wait for tangible signs of execution," said Filippo Alloatti, Senior Credit Analyst at Hermes. "I'm not sure we are seeing a prolonged honeymoon period (for Tidjane Thiam)."

($1 = 0.9611 Swiss francs)

(Reporting By Lawrence White in HONG KONG and Joshua Franklin in ZURICH; Additional reporting by Steve Slater, Sinead Cruise and Simon Jessop in LONDON; Editing by Denny Thomas and Kenneth Maxwell)
 

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