Economic issue: banking

FINANCIAL TIMES NOVEMBER 1 2004

Banker’s profit from attention to detail

Daniel Truchi has learned to cater for the region’s specific needs, writes Florian Gimbel

Step into the offices of a typical European private bank and you will find mahogany-panelled walls and expensive art collections. Not so at the Hong Kong offices of SG Private Banking, where visitors are ushered into a tiny, window-less meeting room.

While it may be an unlikely place for a confession, some SG clients might regard it as the perfect spot to unveil the innermost details of their personal lives.

“Some Asian men have several wives or extra-marital relationships,” says Daniel Truchi, head of SG Private Banking Asia. “They need to make sure that the transmission of wealth is done without disturbing the structure of the family.”

As a French citizen who has worked in Asia for more than 20 years, Mr Truchi has pitted himself against larger rivals, particularly US investment banking groups, which he believes are less successful in building truly personal client relationships.

“We believe private banking is not only about returns and investment ideas,” he says. “But this confidence is not given to you overnight – it has to be built up over years.”

Mr Truchi, who honed his banking skills at Credit Lyonnais in Hong Kong, helped to launch SG Private Banking Asia, part of the French banking group, in 1997 – just before the Asian financial crisis.

Yet, while he admits that the crisis did not help, he insists that the business has been profitable since its first year. It had $10bn of assets under management at the end of 2003 and has seen 20 per cent growth in assets since the beginning of this year.

So how did he do it? In the late 1990s, SG Private Banking bucked trend by offering capital protected, or structured, products rather than initial public offerings and technology stocks – a move that Mr Truchi believes has helped many clients to remain relatively unscathed during the bursting of the stock market bubble in 2000.

Drawing on Société Générale’s expertise in derivatives, the private banking arm has continued to develop – and push – synthetic products that offer double digit returns.

At the same time, the firm has made an aggressive push into trust services by establishing a dedicated company in Singapore, the firm’s regional headquarters.

The city-state is planning to pass a new trust law in the next few months in an effort to compete against traditional off-shore centres in Europe, such as Switzerland, Luxembourg and the Channel Islands, which have been hit by a European Union clampdown on tax evasion and money laundering.

Mr Truchi expects transfers of European private banking assets to Singapore to account for about 25 per cent of the firm’s asset growth this year.

While some of his Singapore-based European rivals remain coy about this potential business opportunity, Mr Truchi has launched a dedicated European client team, led by Pierre Baer, former head of Credit Suisse Private Banking Asia.

He believes that, while others are also seeking to shift some European-based accounts to their newly established operations in Asia, internal resistance may be hard to overcome. “Their commitment to a global structure is often unclear,” he says. “Some banks may prefer to keep as many assets as possible back in Switzerland.”

Mr Truchi believes Singapore-based firms will be able to maintain their level of client confidentiality, despite EU pressure. “Tax avoidance [by European investors] is not a major issue in Singapore,” he insists.

SG Private Banking’s clients include wealthy Chinese entrepreneurs and members of the Indian diaspora, with average liquid assets of $4m-$5m. The firm offers a combination of per­sonal wealth management and corporate advisory services.

“We had to persuade some of these entrepreneurs to segregate properly their personal assets from their corporate assets,” says Mr Truchi. “That’s good for the business and minority shareholders.”

He believes Asian clients are more demanding than their counterparts in the US and Europe, partly because of their weakness for active share trading. “When clients travel to the US, they might call us in the middle of the night,” he says. “We have to find a way of executing their transaction in the 10 following minutes.”

Another relatively untapped private banking market is Japan, where SG launched a domestic on-shore private banking operation in 2002, following its acquisition of Chase Trust Bank Japan.

Mr Truchi believes the local industry has been hit by the actions of Citigroup, the US bank, which was recently ordered to close its private banking operation, following a series of serious regulatory breaches.

Yet, while he acknowledges Citigroup’s “mistakes”, he also questions the severity of the punishment. “You have had a perception of successful foreign bankers at a time when Japanese bankers are going through some painful restructuring.”

SG Private Banking is also planning to expand its business into other on-shore markets such as India, China and Korea. But the firm has yet to demonstrate that it can stand up to its larger rivals amid fierce competition for banking talent.

Mr Truchi believes SG will be able to fend off attempts to poach its bankers, most of whom have stayed with the firm since 1998.

He has hired more than 50 staff this year and is planning to continue hiring in the next few months. As he puts it: “We have to set the monetary rewards at a level where our rivals might find it difficult pay more.”