PRIVATE banking is one sector which, at least in the Slovak banking business, has a relatively short history. Under communism, of course, the idea of a non-state-owned bank that catered solely to very wealthy clients would have been preposterous. But nowadays Slovakia has three banks that focus on private banking, as well as several retail banks that provide specialised services to their wealthiest clients. Since the potential size of the Slovak private banking market is estimated to be between €6 billion and €7 billion, of which only one-half is ‘sheltered’ by banks, analysts regard this sector has having considerable potential.
The current unstable economic situation, even though it differs from the crisis years of 2008 and 2009, is also reflected in the behaviour and expectations of private banking clients, who are now more cautions.
“Private banking clients are seeking support and solutions to protect their assets,” Svetlana Dankovičová, senior vice president of the Slovak and Czech office of Banque Privée Edmond de Rothschild Europe, told The Slovak Spectator. “From the point of view of our bank or our clients the crisis is far from over.”
She added that the policies currently being adopted represent postponement of the problems rather than their solution and thus the primary interest of her clients lies in protecting their assets and maintaining their value.
The bank has traditionally been profiled as conservative and the current situation in the economy and politics has tended to strengthen this philosophy, putting more stress on security.
A similar trend is also visible at other banks specialising in private banking.
Michal Šubín, director of private banking at Privatbanka, part of Penta Investments Limited, sees the current situation as different from that in 2008, as the 2008-2009 crisis arrived very unexpectedly for many investors and resulted in significant drops in asset values. Moreover, it arrived after a long period of growth which had lasted since 2003.
“This meant it was the first time that many private clients had experienced such an intense crisis,” Šubín said, adding that the decline in 2011 was preceded by constant nervousness and increased volatility on all markets. “These impacts and declines could be avoided to a certain extent; it was enough to be sceptical about developments which basically answered none of the questions raised by the crisis of 2008-2009.”
In J&T Banka, part of the J&T financial group, clients are now more interested in themes related to the future of currencies, especially the euro and the US dollar.
“We are now discussing more the strategy for allocation of assets and multi-generational administration,” Andrej Zaťko, sales director at J&T Banka, told The Slovak Spectator. “So it is not only about what is waiting for us over the next few months or years; clients are much more carefully addressing the future horizon over several decades.”
According to Zaťko, some clients have lost trust in money and are trying to convert all their assets into real estate or commodities. He believes that it is not necessary to exaggerate the situation, but adds that a more significant diversification of assets is appropriate.
Šubín added that the current situation also brings some interesting opportunities, which may in the future generate higher yields than those offered by standard investment tools.
Private banking grows
Both Privatbanka and J&T Banka are currently reporting double-digit growth.
“Our bank has been growing by tens of percents annually in the segment of private and premium banking,” Zaťko said. “During the crisis period growth was even more significant than during the pre-crisis years. We expect this trend to continue.”
Zaťko pointed out that the private banking market in Slovakia is becoming more normal.
“In Slovakia, as abroad, there are specialised banks and retail banks which have private banking only as part of their range of services,” said Zaťko, adding that the difference, when comparing Slovakia with Switzerland, for example, is that there are still fewer products prepared especially for private clients. “This, to a certain extent, is linked to the fact that the Slovak client differs somewhat from the Western one in terms of his needs as well as his experiences.”
Šubín of Privatbanka agreed, saying that since the private banking market is a new market, which emerged in Slovakia only after the fall of the communist regime, it needs time to mature.
“Clients as well as bankers have to gain experience,” said Šubín. “Countries in which private banking now has some history behind it have also experienced this stage.”
Dankovičová does not expect any significant changes in private banking in Slovakia in the very near future, while from the longer-term point of view she expects greater openness in the banking sector towards open architecture for clients’ portfolios.
Retail versus private
Private banking is about providing highly tailored top-level services to better-off clients. While in Slovakia, for historical reasons, these are mostly people who have accumulated assets since the fall of the communist regime in 1989, in countries with a longer history of private banking this target group also includes people who have inherited much of their wealth. This difference is also reflected in the differing requirements of Slovak clients and their expectations.
Private banks say they do not regard retail banks as competitors in private banking.
“Retail banks are doing an excellent job in the private banking segment,” said Dankovičová. “But their clientele is not comparable with ours and thus also their activities cannot be perceived as direct competition. Care for private clients in retail banks very often lays in presenting and selling the products of the bank in question. In the case of private banks at question is comprehensive care for the client and his assets, including tax and legal consultancy, design of the optimal structure of all firms possessed by the client, establishment of companies around the world, etc.”
Šubín and Zaťko agreed that the services they provide to their clients are different.
“In private banking the approach is different,” said Šubín, adding that private clients can get access via their private banker to investment tools which are only available to a small circle of investors. “Simultaneously he gets access to investment professionals who manage investment portfolios and can also find one-off opportunities for a small circle of private clients.”
According to Šubín, administration of finances is not only about yields, but also about asset protection.
“Private banking is not about a one-off product, but about a proper understanding of the complex wishes of the client, a proper setting for the portfolio and an understanding of how the financial markets work,” said Šubín. “This is the primary task of the private banker.”
Zaťko pointed out that the basic orientation of J&T Banka is investment and private banking, and says the whole infrastructure of the bank is designed with this in mind.
“All services and products are focused on our target group, which is made up of more affluent clients,” said Zaťko. “They are demanding, and are used to the highest level of services, which must be competitive. The main difference, apart from our preparedness to deal with the most varied needs of clients, is our comprehensive offer of banking, investment as well as non-financial services.”
According to Zaťko, the non-financial services offered to private clients are world-class, and include tax and legal services, purchase of works of art, and holiday and leisure-time planning.
“In most cases this is about relationships and contacts,” said Zaťko. “Clients always appreciate advantages which cannot be bought easily.”
Privatbanka, for example, says it pays considerable attention to health services, including access to better-than-average care, while its clients also have access to comprehensive concierge services, according to Šubín.
But Dankovičová said the experience of Banque Privée Edmond de Rothschild Europe is that that its Slovak clients, like its customers elsewhere, do not place great stress on the non-financial benefits offered by the bank.
“Clients of a private bank primarily expect quality services in the administration of their property, and absolute discretion,” Dankovičová said. “They do not need their bank to organise their holidays or their free time for them.”
She said that her bank does provide a Family Office service, which offers clients, among other things, help with moving house, assistance when buying real estate, boats and aircraft, when buying, selling and restructuring companies, and when buying and selling artworks and commodities.
7. Nov 2011 at 0:00 | Jana Liptáková