Private bank of the year: Credit Suisse

Asia Risk Awards 2020

L to R: Benjamin Cavalli and François Monnet, Credit Suisse

Credit Suisse’s private banking franchise is hungry for opportunities in mainland China. Its vast experience of building up strong onshore offices across Asia, as well as a tightly integrated framework, hands the Swiss bank a definite advantage.

In January, Credit Suisse hired veteran private banker Wang Jing from China Merchants Bank to head up its wealth management services in the country. In July, Credit Suisse announced that it had secured majority ownership of its securities joint venture, Credit Suisse Founder Securities Limited. The Swiss bank also jointly owns one of the largest asset management ventures in the country with the Industrial and Commercial Bank of China, which had assets under management of RMB1.3 trillion ($190.5 billion) at the end of last year.

“China onshore is now in a steady phase of acceleration,” says François Monnet, head of private banking, north Asia, at Credit Suisse. “There was a moment when it was too early to go into China, but what has changed are three things, and the timing matters. First, the regulatory environment is much more friendly and open to foreign ownership. Second, the return expectations from the client have normalised. And third, those wealth management products, which were once guaranteed by banks, are now disappearing. The playing field is becoming much more level for a bank like ours.”

Monnet explains that when expected returns on the market were in excess of 15% – largely because of hugely generous wealth management products that were underpinned by off-balance-sheet guarantees from banks – it was extremely difficult for an international bank such as Credit Suisse to be able to compete. Now that the returns expected from investors are a bit more prosaic, international banks have something that they can offer.

We have succeeded in these markets not by trying to replicate what the domestic banks are doing, but by really bringing our own DNA to the market

Benjamin Cavalli, Credit Suisse

Credit Suisse has an advantage: it has spent the past 15 years building up an extensive onshore presence in Asian markets – from Australia to India, from Japan to Thailand – and it knows what makes a local private banking franchise work.

“We have succeeded in these markets not by trying to replicate what the domestic banks are doing, but by really bringing our own DNA to the market, and offering a service that we think is best suited for clients in the respective home markets where we operate,” says Benjamin Cavalli, head of private banking, south Asia.

He argues that other banks have pursued a very different strategy in some of these regional banks – building their offerings on a brokerage model – and this has left them short when finding a value-add proposition that they can bring to clients. The history books are littered with the casualties of global private banks that haven’t been able to cut it in regional markets. Australia – which most global private banks (Credit Suisse excepted) have now pulled out of – and Japan are good examples of this.

“You don’t go onshore with an offshore mentality,” says Monnet. “Your competition is no longer the international banks of this world. Your competition is the local value proposition delivered by the local banks. So, then you need to work out how you can differentiate yourself.”

Credit Suisse Private Bank started pushing into Australia in 2008, but shunned the brokerage model in favour of establishing a solid presence there.

“It took us a couple of years to establish our differentiation in the market, but we have now got to the point where we are the leading foreign lending franchise in Australia,” says Cavalli.

Credit Suisse’s focus on onshore markets over the years has also been reflected in the bottom line. According to Monnet, seven years ago, 30% of Asia’s assets under management came from onshore wealth management. This has now nudged up to more than 40% today. Bringing such onshore value to China could see these figures skyrocket even further.

“As Asian economies continue to grow, entrepreneurs are increasingly building their businesses and wealth in their home markets,” says Cavalli. “For us, it’s all about access, connectivity, proximity and getting closer to our clients.”

You don’t go onshore with an offshore mentality. Your competition is no longer the international banks of this world. Your competition is the local value proposition delivered by the local banks. So, then you need to work out how you can differentiate yourself

François Monnet, Credit Suisse

In bringing value to local markets, Credit Suisse has another advantage, too: its ‘One Bank’ approach, in which the investment banking desk and the wealth management desk collaborate to a far greater extent than many other organisations.

“Our success is defined by the degree of our collaboration,” says Cavalli. “And if you are a client, you feel this because you have the entire orchestration of the capability of the bank coming around you. This helps us to be early in identifying a client’s needs – when they are just starting their journey as an entrepreneur, and need structures for monetising illiquid assets – to when they are more established, and start having cash and liquid assets to manage.”

Last year, Credit Suisse introduced a new Asian Pacific Trading Solutions (ATS) platform, which sits across both the investment banking and wealth management divisions, in order to drive greater growth in the region. Over the past 12 months, this has been of huge benefit to private banking clients.

“The ATS system means that we are in a position, for instance, to take a very large fixed income book of a private banking client, where the loan-to-value [LTV] ratio is moving every day, and structure it as a bond repack, where the LTV is actually fixed. This structure also considers the portfolio diversification of the client, as opposed to a line-by-line calculation, which would give a higher LTV,” says Cavalli.

One such trade done this year saw the client move from an LTV of around 50%, which was moving every day, to a 67% fixed LTV. This allowed the client to take those additional 17 percentage points and reinvest them in order to get more leverage for the book.

Another structure that has proved popular this year, which was also a product of the close collaboration between the financing group and the private wealth management division, were structured notes issued from a special purpose vehicle, which Cavalli claims were able to give clients a 9–10% return over a one-year period, with Credit Suisse taking a 1% fee.

Monnet insists that many of these kinds of structures, which have been extremely well received by clients this year, wouldn’t be possible without the close collaboration of the different banking units combined with an entrepreneurial spirit.

“The combination of these two elements – the collaboration and the entrepreneurial culture – sets us aside from our competitors. The client-centricity, the integrated bank collaboration and a can-do entrepreneurial attitude really characterises our success. Everything else is just a by-product of that,” says Monnet.