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FINANCE - AFFLUENCE FORCES SLOVAK BANKING SECTOR TO DIVERSIFY

Private banks open as demand grows

SLOVAKIA may be among the countries with the lowest purchasing power in the European Union, but its banking sector has found itself racing to meet the demands of affluent clientele interested in a greater diversity of wealth management services.

SLOVAKIA may be among the countries with the lowest purchasing power in the European Union, but its banking sector has found itself racing to meet the demands of affluent clientele interested in a greater diversity of wealth management services.

Over the last year, several private banks have opened branches in Slovakia and certain financial institutions have started putting an emphasis on private banking and wealth management departments. J&T Banka, Privatbanka, Banque Privée Edmond de Rothschild Europe and Slavia Capital are just some of the institutions that now provide private banking services in Slovakia.

Michal Šubín is a director of Privatbanka, which started as the small Banka Slovakia, but changed its image and services from a retail to a private bank after being bought by the Austrian Meinl Bank.

"The current situation on the Slovak financial market creates great perequisites for the development of this specific branch of banking. The number of wealthy citizens is now growing. Unsatisfied with traditional retail banking, they are demanding more services, and are looking for new possibilities in the management of their assets," Šubín told The Slovak Spectator.

Šubín also expressed confidence that the increasing living standard will further encourage the trend and that the number of private banking clients will continue to increase.

The investment house Slavia Capital has reacted to the new market with a whole department devoted to wealth management. Heidi Kalnická, who manages the division, echoed Šubín's thoughts.

"After reaching a certain threshold, some clients lose interest in keeping their resources on term and individual deposits with low interest rates and become interested in more complicated transactions with higher yields," she said.

In March this year, Czech private bank J&T Banka opened its branch in Slovakia. The bank's founder is the Slovak investment group J&T Finance Group. The group first tried to establish a bank in Slovakia in the 1990s but could not get a banking licence from the National Bank of Slovakia.

In 1996, J&T obtained a banking licence in the Czech Republic through buying a bankrupt bank and set up a successful private banking business in that country. Thanks to Slovakia's accession to the EU, J&T Banka did not have to ask the NBS for approval and came home to Slovakia.

Maroš Sýkora, spokesman of J&T Banka in Slovakia, said the bank is "confident there is potential in this segment. Just look around and you can see there are wealthy people. Anyway, private banking does not need masses."

Many in the banking sector also emphasize that consumers should not be led to believe that private banking houses are simply just retail banks for clients with more money than average.

According to Šubín of Privatbanka, private banking is based on different principles than retail banking, different clientele and different services.

"Clients of a private bank are mainly wealthy individuals who wish to invest their financial resources and develop their property more effectively," he said.

Communication and individual approach are other important differences. Šubín states an individual approach is often transformed into a partnership in which the bank serves an advisory role in finding the best investment opportunities for the client and tailoring investment strategies to their needs.

Kalnická of Slavia Capital added that the difference stems from the fact that clients can even be offered the chance to participate in in-house products, i.e. projects a banking house conducts within its private equity operations or real estate projects.

"In practice, it means that a client is informed in detail about his share in this project, the extent of his exposure, time, yields, and dividend politics," she explained.

A wealth manager is in touch on almost a daily basis, regularly informing a client about the state of their property and other investment opportunities.

"We are definitely for an active approach. We do not just wait for a client's orders but immediately inform them about the opportunities he potentially could take an advantage of," Kalnická said.

Šubín said that a private bank is also able to advise clients in legal and tax matters, the purchase of real estate, acquiring fine art works, and even luxury services and goods, such as holidays and invitations to special events.

"This approach confirms that a private bank is more than just a financial institution that manages client's assets."

Of course, the main condition for becoming a client of a private banking institution is the sum of your banking account, but no one will comment on exactly how much is required.

Slavia Capital, for example, focuses on clients able to invest more than Sk10 million (€270,000). J&T Banka would not specify the exact sum of money, but said growth potential is considered just as important. Account holders at Banque Privée Edmond de Rothschild Europe must have at least a six-digit figure in euros in the bank, but the exact minimum amount required is considered a bank secret.

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