PRIVATE banking, once viewed as the domain of global banks and those tucked in Switzerland, is set to capture a slice of the diversified market in Malaysia's financial services scene.
In the onshore context, there are large opportunities for private banking, said Neville Azzopardi, head of CIMB Bhd's private banking unit. I do not agree with the view that it is a niche market because of the imposition of exchange controls.
Apart from CIMB, another investment bank AmMerchant has launched its private banking services. Maybank, with its large commercial banking presence, is a major player.
A year into the business, CIMB's private banking services have got off to a positive start. It is mainly by word-of-mouth and among a growing circle of people whose wealth, bundled together, can be considerable.
In an overall environment of fragmented portfolios, advice and execution channels, there are opportunities for us, Azzopardi said. This is coupled with the low interest rate environment and volatile equity market.
Such a market will not grow overnight but the concept of trust and advice is expected to find its following. Experience and expertise counts.
To Azzopardi, competition is good as it will bring about better services and help raise awareness of private banking, which is different from priority banking.
We have set up our own investment advisory team which in turn works with the overall CIMB research, economics and debt markets teams, he said.
It makes a lot of sense for investment banks to get into private banking. They serve a lot of corporate clients in various capacities and a lot of individual wealth is tied up in these companies. There is close trust and relationship between investment and private banking, noted Azzopardi.
High net worth clients may be attracted to invest in some of the debt issues that are structured on the investment bank side. Some good examples are the RHB sub-debt and Hong Leong medium-term notes.
Some of the single A3 papers are attractive to high net worth individuals, he noted.
There is considerable wealth in Malaysia among the entrepreneurs and those that benefited from the property boom. Azzopardi said there were an estimated 45,000 liquid millionaires in the country, with assets in the form of cash, equities and funds.
The private banking market may be worth RM150bil to RM200bil, he reckoned. Of the fixed deposits of RM350bil, about RM150bil is in individual accounts.
The move into private banking places a higher demand on excellent service in the amount of time dedicated to service high net worth clients. The advisory model of private banking is quite new in Malaysia, he said.
In terms of product range, more can be done now with high net worth individuals who have since been introduced to the benefits of investing in the bond market, high yielding papers issued by corporates, derivatives and structured products.
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