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Barclays takes cautious approach to building Greater China wealth business
Barclays Private Bank is being cautious in China, building its team in Hong Kong, and plans on continuing to work with individuals with at least US$5 million. But can it maintain its momentum?
The Asset 19 Jun 2015

Greater China has become the hotspot for competition for high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals, as the region continues to boom on the back of Mainland China’s growth. Private banks have lined up across Hong Kong and Shanghai to take advantage of the rapid wealth creation occurring in the region.

 

Many have failed, and have even closed shop, but others have discovered specific ways to service Greater Chinese clients by understanding their specific needs, learning how to cater to them, and building extensive relationships with them to maintain their loyalty.

 
Barclays Private Bank, known for its strength in UK and Europe, has strategically positioned itself in Greater China to service wealthy Greater Chinese clients, while at the same time mitigating risk by being cautious in their approach to Mainland China.
 
The British bank has increased its staff count by 15% since the beginning of 2015, with 60% of them being at a senior level. The leadership within the bank believes that its carefully constructed strategy, and its talented and connected staff, will allow the institution to maintain double digit growth in 2015. But can it maintain its growth in the competitive region, and ensure that it plays a leadership role in mainland China?
 
At least five million dollars
 
Vivian Chan, head of North Asia, Wealth and Investment Management, Barclays said the bank will not accept any clients that have under five million investable US dollars. The executive has highlighted for the last two years that they have a clear segmentation strategy of targeting HNW clients above a certain threshold and UHNW clients with above US$20 million. She said that this allows them to be more focused in offering a strong proposition targeted to the needs of these clients and to achieve scale. The strategy allowed Barclays Private Banking to exit 2014 with US$38.6b AUM in Asia, a 5% growth over 2013.
 
“We believe that our platform is best tailored to clients who have at least US$5 million with us, for them to enjoy the breadth of the proposition we offer. While the minimum AUM is $5 million with us, we have an entire spectrum of clients from US$5 million and above, and an increasing number of billionaire clients. We have seen strong growth across our client segment, especially in the ultra-high net worth segment where we have seen double digit growth over the years,” said Chan.
 
The strategy is not unique in North China, as some of the global private banks also maintain high threasholds of wealth before entering the private bank, due to the fact that clients with less investible assets cost the bank more in terms of compliance. Barclays believes that focusing on higher end clients is more profitable, and allows them to be more focused on what they are good at.
 
Careful approach in China
 
Finding ways to acquire HNW and UHNW Mainland Chinese clients has been the focus of the majority of private banks in Hong Kong for years. The competition for them is highly competitive, as private banks, insurance firms, and family offices compete for their services by providing higher levels of service, advisory services and products to gain an edge. Chan is convinced that the way to gain market share in China with the wealthy is to choose the right clients that fit their criteria.
 
“We have a highly targeted approach in terms of reaching out to offshore Chinese clients. China remains the fastest growing wealth market in the world with six in 10 Asian billionaires coming from China, and it is an important market to us. We are focused on the ultra-high net worth segment there, with our offshore clients being mostly entrepreneurs who have taken their businesses public in Hong Kong and across the world,” said Chan.
 
The bank is specifically seeking Chinese entrepreneurs, as Barclays can leverage its knowledge in business to help them with other important requirements their clients may have.
 
In order to gain an edge in China, Chan hires senior private bankers who already have networks with China, and who are able to bring their clients directly in the bank. Chan said that she also prefers to hire bankers who have commercial banking experience since they understand client onboarding.
 
Staying strong in Hong Kong
 
The core of Barclay’s private banking strategy in North Asia is to stay strong in Hong Kong, and leverage its staff in Hong Kong to continue to selectively target clients in Taiwan and Mainland China. In order to maintain its market share in Hong Kong, it is planning on continuing to acquire high-end talent, and developing its platforms in structured products, structured solutions, FX, brokerage, and improving its behavioural finance expertise.
 
Future in Greater China
 
Barclays, which celebrates its 325th anniversary this year, has seen strong growth of it wealth business in Asia the last few years. Chan mentioned, “We have seen stellar growth in our North Asia business and continue to be focused on deepening our penetration of the market across Greater China. In 2014, we saw client AUM grow 47% from the previous year and we have had a strong year so far in 2015, registering one of our record quarters in terms of transactional revenues in Q1.”
 
But the bank faces significant competition in Hong Kong from Credit Suisse, J.P. Morgan, Bank of China, and other international banks that are focused on building their operations in Greater China. Each of these banks are battling for talent, are attempting to improve their product offerings for their clients, and find unique services to gain an edge in the market.
 
Barclays Private Bank has seen growth in Hong Kong, but it has a long way to go in China and Taiwan. The latter is possibly the most saturated market in Asia Pacific, dominated by local players such as CTBC Bank, Taipei Fubon Bank, and Taishin International Bank. Foreign banks have struggled to acquire the ultra-rich on the island, and China is another market where international banks are struggling to compete with local players, as banks such as China Merchant’s Bank, and ICBC, a bank that has over one third of the country’s bankable population as a consumer client.
 
But Barclays has its own international team that is able to leverage global expertise and resources from various markets to aid its operations in Greater China. The key will be to see if they are able to truly differentiate themselves from all players and continue to attract and maintain top talent.

 

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