SG sees Japan profit as assets grow
TOKYO (Reuters) - The private banking arm of France's Societe Generale (SOGN.PA) expects to break even in Japan by the end of March as its assets under management in the world's second-biggest economy reach critical mass.
In Asia, the world's hottest region for private banking, Societe Generale sees the biggest hoard of untapped wealth lying in Japan. It aims for Japan to make up half of the bank's Asia Pacific assets under management in the next few years, up from 21 percent now.
"We expect to continue to grow assets under management at the rate of 30 to 40 percent per annum," Francois Barbe, the chief of SG Private Banking Japan Ltd, told the Reuters Wealth Management Summit in Tokyo on Wednesday.
Barbe, a former BNP Paribas (BNPP.PA) banker who joined SG four years ago, expects assets under management to rise to 650 billion yen ($5.5 billion) by the end of 2007, up about 30 percent in the increasingly competitive market.
Of a potential market of 780,000 high-net-worth individuals in Japan who have more than 100 million yen ($850,000), SG only claims a 0.12 pct share. However, of the 40 richest families in Japan, who have at least $1 billion in assets, one-fifth have accounts with SG, Barbe said.
"We are more successful in the higher end of the market, where there is less resistance to foreign institutions and more openness to sophisticated services," Barbe said.
Barbe also has been exploring Japan's hinterland, saying 40 percent of its clients are based in cities such as Nagoya. The upside is that there is less competition and people have more time to listen to SG's pitch, he said. On the downside, SG is an unknown entity in those parts, he added.
Barbe is exploring agency agreements with regional banks, but no full-fledged alliances as the bank could not handle a sudden influx of 20,000 clients. Eventually it aims to set up offices in Osaka and Nagoya, Barbe said.
A wave of retirements by Japanese baby-boomers, expected to begin next year, has bankers jockeying to manage their nest eggs.
According to Nomura Research Institute (NRI), about 865,000 Japanese households have at least 100 million yen available to invest. A domestic inheritance market of about 80 trillion yen ($680 billion) annually will emerge in the next 10-plus years.
"There will be a boom in private banking, driven by several factors: people getting richer, growing awareness of investment facilities, and inheritance will become even more of an issue over the next few years as the population ages."
SG Private Bank expects the 350 billion yen ($3 billion) in its Japanese private banking business to grow to 450 billion yen ($3.8 billion) and the 150 billion yen ($1.3 billion) in its corporate trust business to rise to 200 billion yen ($1.7 billion).
Assets under discretionary management which totaled 16.4 billion yen ($139 million) at the start of 2005 are expected to rise to 70 billion yen ($590 million) by the end of 2006.
THE CHALLENGE
Key is finding the right people. SG Japan currently employs 26 private bankers and aims to have nine more by the end of next year.
It aims to expand its client base through referrals and tapping into regional markets. SG Private Bank is also planning to hire more marketing and sales people in the months ahead.
"Competition will come mostly from the Japanese banks, because they have loyal clients, something which is difficult for us to acquire, and trust, which takes time for us to build."
Barbe said he has an advantage over many rivals in that SG is the only foreign trust bank completely dedicated to private banking, allowing a wider range of products.
SG has to overcome a relatively unknown brand.
"In Japan, clients take a long time to assess whether you are credible, so the process of winning confidence is slow," Barbe said.
