Private banking finds its niche

YEARS after the fall of the communist regime, Slovakia has a growing number of people who have found wealth from restitution, business success or other means – making the country ripe for the spread of private banking.

YEARS after the fall of the communist regime, Slovakia has a growing number of people who have found wealth from restitution, business success or other means – making the country ripe for the spread of private banking.

All major retail banks operating in Slovakia offer different banking services for clients with deeper-than-average pockets, but there is also a growing market for institutions that have been shaped specifically to serve these clients.

Private banking is based on different principles than retail banking. The client does not pick services from a bank’s offerings, but it is the other way around: the bank tailors the products to the client’s needs.

Because discretion is one of the main selling points of private banks, these banking institutions are reluctant to disclose the number of clients they serve and the amount of assets they manage. That means the market has no standardised criteria to measure this segment, market watchers said.

Estimates on the number of private banking clients in Slovakia vary, but most estimates say they number in the tens of thousands, and the combined total of their assets is around Sk100 billion to Sk150 billion (€3 billion to €4.5 billion.)

“Based on the estimates of prominent foreign institutions, the potential assets of private banking in Slovakia are approximately Sk150 billion,” Ľuboš Ševčík, director general of Privatbanka, told The Slovak Spectator. “These funds are held by approximately 20,000 citizens who each have Sk4 million to Sk12 million, and another 3,000 people who have more than Sk30 million each.”

Private banking first appeared in Slovakia around 2000 or 2001. Clients include successful businesspeople, managers, people who got property back from the state after it was confiscated under communism, athletes, and also lottery winners and people who inherited assets or sold real estate, industry insiders said.

Private banking is the core business for Privatbanka, J&T Banka and the Slovak arm of Luxembourg Banque Priveé Edmond de Rothschild.

Major retail banks, including Slovenská Sporiteľňa (SLSP), VÚB, Tatra Banka, ČSOB and Istrobanka, also provide private banking services for what they call “VIP clients”.

In practice, it means that the client has a private banker who mediates his contact with the bank, Ševčík said.

“Their contacts often grow into a very close relationship, where the private banker has a perfect view of the financial aspects, and also other aspects of the client’s life,” he told The Slovak Spectator.

Discretion, communication and trust are the main slogans of private banking, according to private bankers operating in Slovakia, and communication is always based on a highly individual approach.

“The bank proposes to the client a suitable way of managing of his property based on the information it has collected,” said Radoslav Vavruš, head of the private banking department of SLSP.

“A good private banker is like a good tailor,” said Andrej Zaťko, who sits on the private banking steering committee at J&T Banka. “He not only knows your size, but he also knows your tastes, your preferences and what suits you.”

Clients’ expectations growing

A Slovak private banking client does not really differ from a private client abroad. He might work harder with his assets and is more demanding in terms of getting a return on the money, according to Ševčík.

“In general, private clients are very demanding,” Ševčík said. “They are very particular about professional services and communication. They expect from the bank a creative attitude and innovative solutions.”

Eva Šinková of Tatra Banka said that along with becoming more demanding, private banking clients are also becoming better oriented in the products and services they want to access.

“The Slovak investor is historically very conservative, but he would like to participate in the higher potential revenues of dynamic markets, like for example the BRIC region (Brazil, Russia, India and China), Balkan and Baltic countries, Latin America, and also the Visegrad Four countries,” Peter Guľvaš, the private banking director at VÚB, told The Slovak Spectator.

The more money a private banking client invests, the better the bank can meet his needs and diversify his portfolio. Privatbanka can offer services for accounts of Sk1.5 million or higher, but it sees Sk10 million as an ideal starting amount, Ševčík said.

“Such an amount offers room for creativity, but on the other hand, it lets us diversify the invested money,” he said.

Would-be clients of the Slovak branch of Rothschild should have at least millions of euros, the Hospodárske Noviny economic daily wrote. The bank also checks the origin of the money and the client’s reputation in society.

Retail banks put the starting capital for private banking somewhere between Sk1.5 million and Sk10 million.

“The investment options for these clients are actually limitless,” said Vavruš of SLSP.

Banks also differ in the level of private banking services they offer.

“Mercedes, BMW, Bentley, Rolls-Royce: they all fall under the category of luxury cars, but everybody understands that there is still a relatively big difference between a Mercedes and a Rolls-Royce,” said Zaťko of J&T Banka.

“The situation in private banking is the same.”

A private banker manages clients’ accounts and loans and helps them with their business banking.

But the banker can also help organise a business trip or holiday or help the client buy a yacht, Zaťko said.

“In principle, the private banker takes care of everything,” Zaťko told The Slovak Spectator. “When the client is lying on the beach reading papers and something jumps into his mind, we make the idea happen and he doesn’t need to move from the beach.

“We buy Christmas presents on behalf of our really busy clients.”

Because private banking is quite young in Slovakia, and the country’s economy is growing quickly, there is a chance that each bank will find its niche in a growing market. Tatra Banka sees private banking as one of its strategic segments, Šinková said.

“Given the short history of this service in Slovakia and the dynamic economic growth, there is the potential for it to get bigger, or maybe double,” said Guľvaš of VÚB.

“The number of well-off people is increasing and the amount of their assets is growing dynamically, too,” said Ševčík of Privatbanka.

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