Julius Baer seeks M&A deals across Asian markets
Swiss private bank eyes targets in Middle East, India and China, CEO says, as global wealth management industry primes for consolidation
The global wealth management industry is poised for consolidation and Julius Baer, one of the world’s largest Swiss private banks with $400 billion (Dh1.47 trillion) in assets under management, is eyeing mergers and acquisition opportunities in Asian growth markets such as the Middle East India and China, its chief executive said.
The Zurich-headquartered bank can spend up to $500 million on acquiring assets without approval of its shareholders but for larger transactions, it will have to get the green light from both shareholders and investors, Mr Bernhard Hodler told The National.
“I think the consolidation in the wealth management industry will continue, if not accelerate, over the next [few] years,” he said. “We are definitely interested in growing through M&A. I know that I have the backing of the [bank’s] board and I know I have the backing of the larger shareholders.”
Investments into technology and regulatory requirements are the key drivers of potential consolidation in the global wealth management industry, with many smaller firms struggling to spend heavily on digitisation to compete with larger competitors such as Julius Baer.
“I see, over a period of time, smaller and mid-sized competitors being on the market [for sale],” Mr Hodler noted.
The bank, with a capital base of about $6bn, has the capacity to make acquisitions and invest in technology, improving the platforms of acquired businesses, he said, adding that with “our size of the organisation, we can invest money … we have done it [in the past]”.
Julius Baer has been acquiring assets and forging partnerships worldwide to expand its presence in different geographies. The Swiss bank forged a strategic wealth management joint venture with Siam Commercial Bank in Thailand in March 2018 and completed the acquisition of 95 per cent stake of Reliance Group in Brazil in early June. More recently, Japan's Nomura agreed to buy a minority stake in Julius Baer Group’s unit in Japan.
The wealth manager merged with the ING Bank (Switzerland) in 2010 and integrated $60bn worth of assets when it acquired international wealth management unit of the US-based Merrill Lynch in 2012.
“I would not rule out that this [Merrill Lynch-type transactions] is still possible these days but, of course, that is something where you have to convince the investors and shareholders that this is a good idea and this is accretive ... and we will be able to come up with synergies,” he said.
If an opportunity of such scale arises, Julius Baer will consider it, Mr Hodler said, declining to say if the bank is currently evaluating any deal of that size.
The bank has recently identified 17 core markets globally where it consistently wants to invest and grow including the two biggest Arab economies, Saudi Arabia and the UAE.
Julius Baer, which uses Dubai International Financial Centre as its regional hub, has rapidly grown its business in the region, increasing staff in Dubai to about 160 currently from 120 last year and hiring 14 relationship managers to serve its Middle Eastern client base this year alone.
The wealth manager intends to keep growing its business in the Middle East, which has yielded “significant growth”, with the bank hitting its targets of 4 to 6 per cent in terms of on-boarding new money. It is bullish on the economic growth prospects of broader region.
“Our main markets are UAE and Saudi Arabia … we are in other markets too but these are the two very attractive markets,” Mr Hodler said, adding that the bank would consider growth through M&A if it sees an opportunity.
The numbers of ultra-high-net-worth individuals in the Middle East – people with a net worth of more than $30m – are projected to increase by 20 per cent in the next five years, according to a new report by global property consultancy Knight Frank. That means the region will add another 1,660 people to the upper band of the very wealthy by 2023. Asia is the biggest hub for billionaires in particular. By 2023, there will be more than 1,000, accounting for more than a third of the world’s billionaire population, according to the study released in March.
Julius Baer, within east Asia, is focusing on China, Hong Kong, Singapore, Indonesia and India, primarily.
Asia accounts for about a quarter of the bank’s business and it is keen on expanding its footprint in both China and India. It is currently serving China, the biggest Asian economy, from its offices in Singapore and Hong Kong, and is servicing its mainland clients in partnership with Bank of China.
In the medium-term, Julius Baer plans to establish an onshore presence in Chinese market.
“For me it’s not the question of if we will go to China, it’s a question of when and how,” Mr Hodler said, adding that M&A is a route the bank will consider, if an opportunity arises.
Within the Indian market, the lender has “onshore presence” and substantial non-resident Indian business. If it combines both NRI and onshore businesses “we probably have one of the biggest portfolio of [AUMs] in the country" said Mr Hodler.
“It’s a good starting position" and Julius Baer sees 6 to 7 per cent annual growth of its business in India, which could accelerate if an M&A deal presents itself, he added.
Updated: May 4, 2019 06:55 PM