PWM/The Banker Private Banking Awards 2013: Central and Eastern Europe

Best Private Bank in Central and Eastern Europe, and Best Private Bank in Hungary: OTP Private Banking

OTP Private Banking is a dynamic, growing playerin central and eastern Europe (CEE), having a dominant market position in its home country, Hungary, and good coverage in several countries in the region. Last year the institution saw its assets under management swell by 24% to about Ft739bn ($3.37bn) and its client base rise by 22%, compared with an average growth rate of 13% among its eastern European competitors, according to OTP.

The main driver of the firm’s success is its “unique and innovative approach to regional growth, through which it can effectively exploit the extraordinary growth potential of the region”, according to Andres Takács, head of private banking at OTP.

OTP not only applies different client segmentation thresholds across the region, but adapts the value propositions offered to client segments to the local market conditions, using group-wide standards and local features and also taking into account the strategic position of the firm’s subsidiary in each country. 

“This unique approach proves to be very effective in a region that is defined as one, but where in reality there are huge differences between countries,” says Mr Takács.

The bank also developed an efficient methodology to migrate clients from its retail network, supported by an effective incentive system. Last year in Hungary, almost 80% of new clients were sourced from the retail bank’s client base, while the implementation of a joint small and medium-sized enterprise (SME)-private banking value proposition attracted new SME owners.

The introduction of an efficient resource allocation model led to a considerable increase in the average size of assets brought by new and existing clients. Last year, about 60% of asset under management growth was generated by net new money inflows, and in 2013 it is expected to be even higher. 

Although revenue margins shrank significantly in the region due to a dramatic decrease in interest rates, which caused a sharp drop in net interest margins, OTP Private Banking was able to sustain its profitability by implementing a strategy to boost revenue generation in different areas. Selling more complex investment instruments to meet client needs drove the bank to enhance its risk management process and upgrade its relationship management training programme.

 “Despite decreasing revenue margins, the private banking business in CEE countries will remain more profitable than in mature European countries, in terms of average profit margin,” says Mr Takács. 

Best Private Bank in Russia: Credit Suisse

After opening the Moscow office in 2003, Credit Suisse has continued growing its Russian business, and since 2006 it has established full onshore private banking services in Moscow and a new office in St Petersburg. 

“Credit Suisse has been present in Russia for 20 years with uninterrupted operations, even during several times of financial distress in the country,” says Michael Knoll, head of private banking for Russia, addressing critics who claim the bank has wavered in its engagement with the country.

Its ‘one bank’ model offers Russian clients, who are mainly entrepreneurs, expertise and the capabilities of its private banking and investment banking businesses, tailor-made ultra-high-net-worth solutions and a global specialist network. The bank’s multi-shore approach allows clients to manage their assets in many financial centres worldwide, with the assistance of specialised Russian-speaking relationship managers.

“Our continuous efforts to deliver all the benefits of our integrated bank to clients and offer them the multi-shore capabilities they require has proved to be one of the best value propositions in the industry,” says Mr Knoll. “We continue to be fully committed to our clients and Russia as a whole. Furthermore, we are committed to Russia as a key growth market.” 

In 2012, the bank further built its franchise by investing in staff training, hiring additional professionals to cover other large cities and improving its offering. 

In the attractive wealth market in Russia, opportunities in the medium-term are found in clients’ increasing needs to monetise business assets as well as transfer first-generation wealth to the succeeding generation. “Clients will require a good deal of execution capabilities, from mid- to large-cap transactions as well as strong wealth planning expertise,” says Mr Knoll. “Our approach to wealth planning takes these specific needs into account, particularly through our specialist wealth management teams, comprised of investment consultants and wealth planners.”

Through its corporate bank in Switzerland, Credit Suisse provides ship financing, which is unique in the Russian market. The firm also allows Russian investors to participate in the burgeoning trade developing between Russia and Asia via direct and indirect investments in private equity, real estate and Asian securities. In 2013, Credit Suisse set up a dedicated oil and gas private banking team to further specialise in one of the most important wealth generating sectors of the Russian economy. 

Globally, Credit Suisse attracted SFr19bn ($20.77bn) in net new assets from wealth management clients last year, bringing total assets under management to SFr798.5bn.

Best Private Bank in Ukraine: UkrSibbank BNP Paribas Group

UkrSibbank, under the majority ownership of the BNP Paribas group, which bought a final tranche of shares from previous owner, Kharkiv-based businessman Oleksandr Yaroslavsky in 2010, is one of the rising brands in Ukraine’s fledgling private banking industry. It currently boasts six private banking centres in the country’s major cities, staffed by 38 relationship managers, and expects client numbers, currently about 2000, to grow by more than 500 by the end of 2013. 

The bank began developing its private banking model back in 2005, launching what it claims to be Ukraine’s first website in this sector in 2006, the same year it created waves in the market by starting to sell mutual funds to private clients. It also started providing regular information digests for clients in both email and magazine format, a practice it says has since been adopted by both Ukrainian and Russian private banks.

Other initiatives have included client loyalty programmes, offering privileges and discounts with ‘partner’ hotels, shops and restaurants, and the creation of a private banking club. This idea of creating a club-type feel, allowing clients to think they are in an exclusive circle, meeting at venues such as golf clubs, has been central to the vision of private banking boss Oleksii Aleksandrov. 

UkrSibbank segments its clients into ultra-high-net-worth individuals, with assets of more than $1m, high-net-worth individuals with funds of between $200,000 and $1m, and what it terms as ‘social clients’, those with between $100,000 and $200,000 to invest. 

While Ukrainian banks have struggled in an uncertain political and economic climate and in an atmosphere where the reputation and background of many leading business people is often called into question, UkrSibbank likes to emphasise the “application of European principles and approaches to monitoring clients’ reputation and compliance with the established principles of counteracting legalisation of illegally obtained funds”.

Ukrainian clients, says Mr Aleksandrov, are “born and raised in a stressed atmosphere”, so very little surprises them in terms of economic shocks. The biggest demand from them, he says, is for foreign currency deposits, the income of which is not taxed under Ukrainian law. 

The bank has also been forging links with Ukrainian children, launching the Young Bankers’ School for those who will one day inherit significant capital.

Best Private Bank in the Czech Republic and Best Private Bank in Slovakia: CSOB Private Banking

CSOB, winner of the award for best private bankin both the Czech Republic and Slovakia, is primarily differentiated from its competitors by its global portfolio management system, which helps portfolios to be viewed in terms of asset classes instead of single products, allowing a clearer picture of their volatility, diversification, protection and risk/return. This year the system has been upgraded with information to make the fees transparent, and web pages for clients to access investment information.

The investment advisory process has been improved and innovative products such as Private Portfolio of Funds and investment certificates have been used, while in commercial banking, much of the focus was directed towards arranging Lombard loans and buy-sell backs.

The company says its strategic model portfolios have also been well received by clients – hitting the bull’s eye, as they have become the most sought-after products by its customers.

The transfer of assets to the next generation has a particular context in the Czech Republic, as it is only now, 23 years after its dissolution, that a generation of successful entrepreneurs has reached the age when they need to find solutions for the transfer of their assets to the next generation.

As of next year new opportunities will emerge in this space as a new civil code takes effect in the Czech Republic, which the bank plans to target. It has been active in the Czech Banking Association and currently chairs its private banking section, with the aim of coordinating the stance of Czech private banking towards succession planning.

 “This award reflects more than 10 years of hard work of all CSOB Private Banking employees and has been achieved through inventiveness and taking the initiative in our customers’ approach executive,” says director of private banking Martin Kosobud. “We have the strongest branch network in the Czech Republic, the most stable team of employees, an investment advisory customer service and employees and customers involved in charitable purposes.”