The results of the latest Hubbis weekly poll suggest there will be a wave of consolidation across the Asian private banking industry over the next 12 months.

Date: Oct 28, 2011

Tags: Value proposition

The results of the latest Hubbis weekly poll suggest there will be a wave of consolidation across the Asian private banking industry over the next 12 months.

Two-thirds of respondents said consolidation will “definitely” happen, while one-third said it will happen in a “few cases”.

Interestingly, not a single respondent to the poll said consolidation was “unlikely”, or that it would definitely not happen.

The unsustainable cost-to-income ratios in the industry are one of the driving forces for expectations of a shake-out, after the announcement earlier this month that Julius Baer will take over the US$1 billion Asian private client portfolio of Macquarie.

Yet despite it being a challenging environment for banks to be profitable, competition remains intense for now, as new and existing players chase their share of the growing pie in Asia.
 
This intensely-competitive landscape is coupled with low margins and stead-to-lower assets under management for many firms.

And combined with further regulatory tightening, as well as the likely continued rising demand for talent (while supply remains limited), respondents to the poll predicted a shake-out over the course of 2012.

Winners and losers

When assessing who might be the winners and losers in the Asian private banking space of tomorrow, respondents gave the following comments:

"It will be more important to have critical size and good execution. Size matters, so the big ones will survive.”

"Asian banks, and European banks with either strong platforms or a niche, will be the survivors.”

"The banks who can accept that the strategy can be different in different parts of the world, and who show commitment to the region, will stand out.”

"The losers will be those private banks which have a limited product range.”

"Market participants who best master the trade-off between the tougher regulatory environment and still retaining strong client-focus and flexibility to deliver will be the winners.”

"Those smaller banks with high cost-to-income ratios will come under increasing pressure.”

"Organisations that are able and willing to adapt to the new environment quickly, stand to gain in the near future and beyond. It will not be the classic ‘survival of the fittest’, but instead a case of being adaptive enough to stay ahead of the curve and the pack.”