Wealthy LatAm clients eye onshore option

Santander Private Banking International Area Manager Antonio Costa gestures during the Reuters Global Wealth Management Summit in Geneva October 6, 2009.

GENEVA (Reuters) - Wealthy Latin American investors are starting to bank in their home markets as they gain confidence in local banking systems, but Miami and Switzerland are still considered as safe havens by the majority.

Spain's biggest bank Santander (SAN.MC), one of the top three banks in Latin America in terms of assets, has just raised $8 billion from the initial public offering of 15 percent of its Brazil unit. It plans to use part of the funds to finance its expansion in all banking operations there, including private banking.

Santander is also investing more in local private banking operations in Mexico and Chile, Santander Private Banking managing director Antonio Costa told the Reuters Wealth Management Summit in Geneva.

"We are implementing in these countries the business model developed by our Banif unit," said Costa, who is based in Geneva.

Banif is Santander's private banking division in Spain which offers clients a wide range of services from investment management to retail banking.

"We have had a very good experience in Spain with the Banif model and we want to pass that on to Latin American clients," Costa said.

"We are going to see more of an onshore banking trend in the region," he said.

Brazil is widely seen as the country with the most growth potential in Latin America, because of its vast natural resources and capacity for exports to meet the growing demand from countries such as China.

"In places such as Brazil... investors continue to gain confidence in local banking systems and are becoming more receptive to onshore investments," the Boston Consulting Group said in a recent report.

Latin America is the fourth largest region in terms of super rich and in 2008 retained the largest percentage of ultra wealthy relative to the overall population of high-net worth individuals despite the financial crisis, according to a recent report by Capgemini and Merrill Lynch Wealth Management.

Most of Santander's Latin American rich clients are invested in high-growth corporate bonds, but many in Brazil have piled into the U.S. equity market over recent months.

"So these clients prefer to bank through our Miami office because of the time zone question," Costa said.

POLITICAL INSTABILITY WOES

Political and financial instability and personal security remain key concerns however for the very rich in Latin America, and where trust in local banking systems has been compromised during past financial crises.

"The political and financial instability, as well as the local safety concerns some of these clients are facing, makes them favor Switzerland as a safe haven for their assets, regardless of whether they are declared or not," said Alexander Classen, Head of Private Wealth Management EMEA at Morgan Stanley Private Wealth Management (MS.N).

For this and other reasons Switzerland, the world's largest offshore banking center, has lost little of its shine even in the face of attacks from the Group of 20 nations over banking secrecy and tax evasion.

So although the super rich in Latin America are doing more business locally and through Miami, they will continue to favor Switzerland for diversification, both geographically and in terms of confidentiality, said Felipe Godard, Managing Director and Head of European International Markets at JP Morgan Private Bank (JPM.N).

"Switzerland offers many advantages to clients. It is in the center of Europe and has a strong banking system and regulation," he said.

"It has a pool of talent as far as service providers are concerned and offers a level of confidentiality and discretion which is important in today's world," Godard said.

(Reporting by Judy MacInnes; editing by Chris Wickham and Hans Peters)