Thailand's Private Banks Eye Optimal AUM for Profitability Amid Rising Competition

Thailand's private banks are honing in on clients with assets between $1.5m and $3m, identifying this range as the optimal investment threshold that assures profitability. This focus comes as the country's wealth management sector observes a sharp rise in competition and operational costs.

The wealth management industry has witnessed certain local and international private banks elevating their minimum investment requirements, shifting from roughly $2m to $5m. This trend is attributed to increasing expenses related to hiring skilled private bankers, boosting internal infrastructure, and meeting stringent compliance regulations.

Thailand's flourishing affluence, as indicated by its 46 billionaires in 2022, positioned it eleventh globally on the Hurun Global Rich List. This wealth surge has generated a heightened demand for private banking services. Furthermore, the allure of consistent revenue streams in contrast to the variable nature of investment banking revenues has caused numerous banks to gravitate towards wealth management.

The competition in the sector has further intensified with global private banks, such as BNP Paribas Wealth Management, venturing into the Thai market. Other notable entrants include HSBC Global Private Banking, Julius Baer in partnership with Siam Commercial Bank, Lombard Odier with Kasikornbank, and Pictet aligned with Bangkok Bank.

Experts opine that a higher AUM threshold presents numerous benefits, including the opportunity for clients to diversify their portfolios, access a wider range of investments, and maintain flexibility in portfolio modifications. While some industry leaders believe $1.5m is the sweet spot, others like Narit Kosalathip, the wealth management head at Kiatnakin Phatra Securities, lean towards a higher figure of $3m due to the intensified competition.

Determining an exact AUM figure is complex as it is influenced by various factors, including clients' risk tolerance, product inclinations, and individual behaviors. Additionally, every bank's business model, such as the desired client-to-manager ratio and the balance between costs and expected minimum revenue, plays a crucial role.

Meanwhile, Kitiwat Nanthawatsiri from UOB Thailand posits a much higher benchmark, citing $10m as the minimal investment threshold to access diverse wealth products and ensure substantial revenue for advisors.