GENEVA (Reuters) - Europe's biggest bank HSBC Holdings HSBA.L expects to build its wealth management staff by at least 10 percent annually for the foreseeable future, despite rapid industry growth creating a shortage of private bankers.
Chris Meares, who will take over as CEO of HSBC Group Private Banking at the start of next month and is currently head for the UK, Channel Islands and Luxembourg, said at Reuters’ Wealth Management Summit that rapid growth had put pressure on the industry but prospects were strong.
“Because of the growth over the last three years you have seen some pressure on the pool of talent. But there’s no doubt that people are part of the fuel that’s needed to increase your business.”
Meares said wealth management was the fastest growing part of HSBC’s business, a trend seen across banking. HSBC Private Banking currently employs 6,500 globally.
It had $305 billion in client assets at the end of June and ranked as the world’s eighth biggest wealth manager in 2005 by invested assets, according to research by Bear Stearns.
The bank rebranded its service for high net worth customers as HSBC Private Bank in 2004 and the unit’s profits hit $600 million in the first half of this year, up 30 percent from the previous six months, but still representing just under 5 percent of HSBC’s group profit.
“Although it’s only 5 percent of the group’s profit we’d love it to be 10 percent, it just depends on the pace of growth in the group. But it is the fastest growing bit of the business and that’s why we are putting a lot of resource and attention to it,” Meares said.
Acquisitions have swelled the headcount and the contribution of private banking and could continue to do so.
Meares said the private bank tends to benefit from group purchases, such as Republic National Bank of New York in 1999, which often include wealth management businesses, although it would also look at bolt-on deals of its own.
“What we’ve been lucky about is that when this group makes an acquisition invariably it brings a private bank business with it,” Meares said.
“It’s a very fragmented industry and there will always be acquisitions happening. For us, we don’t need to make an acquisition in most parts of the world,” he said, but added that smaller deals could occur.
He said a big deal is unlikely in the United States -- where HSBC Private Bank is seen as subscale compared to its global footprint -- due to lofty valuations, Meares said.
“You might argue that we should make an acquisition in the U.S. but the valuations tend to scare us off a bit. So I think it would be difficult to make a major acquisition, at this point in the market you’d be paying top dollar.”
He said that left its focus on organic growth in the U.S.
Consolidation across wealth management has been widely tipped, given the fragmented state of the industry and predictions for robust growth in the coming years.
Meares said the costs of regulation and the expense and complexities of providing a suite of products made scale important and more consolidation likely, but said there remained a role for smaller private banks if they remained focused.
“There’s always going to be a role for private banks but they’re going to have to be very focused on either a customer base or expert in a few particular products,” he said.
He also said demographic changes supported bullish predictions for industry growth.
“There are pressures on the industry but in the long term I don’t see too many threats.
“People are living much longer so they need to make investment choices. That will clearly drive the wealth management industry for the foreseeable future,” Meares added.
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