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Asia focus fuels growth for Credit Suisse

Singapore

AN "empowered Asia" strategy is paying dividends for Credit Suisse's private banking business in the Asia-Pacific.

Assets under management in 2017 rose 18 per cent to a record 196.8 billion Swiss francs (S$270 billion), and net new assets grew 24 per cent to 16.9 billion Swiss francs. These were achieved on the back of a reduction in the number of relationship managers, and a marked improvement in cost-to-income ratio.

Said Francesco de Ferrari, Credit Suisse head of private banking, Asia-Pacific: "We have an empowered Asia division as of two years now. We effectively run all business on a regional perspective; we approve all allocations of capital, investment and credit lines in the region. Almost everyone else runs it globally."

Among the bank's divisions, the Asia-Pacific is the only one which has merged private banking and investment banking into a single unit, dubbed "Wealth Management & Connected" (WMC), a move designed to better target the needs of its desired clientele, who are Asia's entrepreneurs.

A second business line falls under "Markets" comprising cash equities, prime brokerage, fixed income and solutions.

In keeping with the focus on entrepreneurial clients, the bank created an Asia financing group, which centralised the oversight and structuring of risk books and lending into one team. "(This) ... allows us effectively to better serve entrepreneurs for whom the lines are really blurred between personal and business, in a lot of instances."

He added: "It also allows us from a risk point of view to be able to have consolidated risk positions, which is very important. Right now we're in a very positive credit cycle. A lot of banks are willing to take on risks. But Asia can turn very quickly, so having a consolidated overview of risk across personal and corporate allows us to take better risk decisions."

WMC's revenues rose 22 per cent to 2.32 billion Swiss francs; pre-tax income surged 63 per cent to 799 million Swiss francs.

Private banking comprised 70 per cent of WMC revenues, coming in at 1.6 billion Swiss francs, a rise of 17 per cent. Pre-tax income swelled by 50 per cent to 541 million.

At end-December, there were 590 relationship managers (RMs), compared to 640 at end-2016. On average, an RM manages around 333 million Swiss francs in assets, compared to 260 million Swiss francs at end-2016, a rise of about 28 per cent. Net new assets per RM rose by around 38 per cent, and pre-tax income per RM by over 60 per cent.

Cost-to-income ratio of WMC fell from 72.8 to 64.9 per cent.

Recurring commissions and fees, a coveted feature among banks looking to grow beyond transactional income, rose 19 per cent to 381 million Swiss francs. Mr de Ferrari reports a healthy take-up of the bank's fee-based advisory service CS Invest, launched around eight months ago.

CS Invest currently has assets under management of around US$3 billion, "which for us is extremely positive", he said. More than half the accounts are new.

"I tell the team, rather than absolute AUM, it's important that every RM has the experience of selling one of these advisory mandates. In five years, this will represent the future of our business. We need to get clients to pay for our service and professionalism, providing advice and risk management and not just the individual transaction."

"We're also doing a number of very large mandates - 200 million Swiss francs and upwards. That's extremely important. It shows this is not just for smaller clients; this really is about a new way of working."

Discretionary mandates have also grown by around 30 per cent. This, plus CS Invest, will boost penetration of fee-based services to somewhere in the double digits.

"We're all coming from a pretty low base. The purpose of wealth management has to be to make clients better investors."

Meanwhile, Mr de Ferrari says 2018 is likely to shape up as a "very active year" for banks as the investment backdrop shifts.

"In general, many clients have made a lot of money leveraging on fixed income in the last two to three years. And maybe we were slightly more cautious on equities ... If we look at the next two to five years, the environment is going to be very different."

Interest rates are trending upwards as global central banks withdraw quantitative easing measures. Inflation is also set to pick up.

"All of a sudden, you are not going to make the same money leveraging fixed income anymore. Equities are the better place to invest. Having an index or passive management isn't going to deliver the same results and you need to be very selective on the markets and sectors you choose ... So clients really need to think about how to deploy their money."