Edmond de Rothschild to close Hong Kong private banking outpost

Edmond de Rothschild (Suisse) SA is to close its Hong Kong private banking operations, the bank said in a statement on Thursday. 

The planned closure was the latest in a series of announced withdrawals from an Asian market by a European or North American private bank, as the region becomes more crowded and expensive for them to operate in, and Asia-based institutions expand.

The news comes some seven months after it was given approval by China’s banking regulator to close its Shanghai representative office.

Geneva-based Edmond de Rothschild, which had CHF163bn (£127.6bn, US$161.76bn) under management at the end of June, said in a statement that it “reiterat[ed] its commitment to continue exploring the growth opportunities in Asian markets through selective strategic partnerships with leaders in the region, such as SMBC Nikko Securities [in Japan], and Samsung Asset Management” in Korea.

It will oversee these partnerships out of its Swiss head office.

In its statement, the Swiss wealth manager added that its decision to withdraw from the Hong Kong market was part of “a wider strategy to offer its international clients best of class asset management and private banking expertise from the European market”.

According to the   Reuters news service, which originally broke the news of the company’s plan to leave Hong Kong, the Edmond de Rothschild asset management operation in Hong Kong is also due to close.  The organisation didn’t address this in its statement. That operation was launched in Hong Kong in 2007.

No date for the closure was given.

‘Feeling the heat’

The Reuters report noted that in addition to growing cost and regulation pressures, private banks in Asia are currently “feeling the heat from aggressive tax amnesty programmes in Indonesia and India”, which are designed to bringing offshore wealth back home, ahead of a global move to introduce automatic information reporting between countries known as the Common Reporting Standard.

Currently some 87 countries have agreed to being part of the automatic exchange of information agreement, which will begin to take place next September, although some jurisdictions aren’t set to participate until 2018.

Reuters cites a recent Asian Private Banker report which found that AUM at the top twenty private banks operating in Asia “declined 4%, to $1.5trn, in 2015”, and noted that 2016 was expected to turn out to have been “tough” for the industry as well.

Nevertheless, banks are attracted by Asia’s growing ranks of high-net-worth individuals, although frustratingly for many, much of that wealth is on the Chinese mainland, where local banks have a first-mover advantage, and where the Chinese government is increasingly determined to see that it doesn’t get moved abroad.

At the end of 2015, there were 5.1 million high-net-worth individuals in the Asia Pacific region, with a combined wealth of US$17.4trn,  according to consulting firm Capgemini’s World Wealth Report, which assesses a high net worth individual to be one with more than US$1 million in investable assets. This compared to a North American HNWI population of 4.8 million, with a combined wealth of US$16.6trn.

Early entrant into Asia HNW market

Edmond de Rothschild opened in Hong Kong in 1992, when it was part of an initial wave of financial services institutions that set up shop there around that time, ahead of the scheduled 1997 “handover” of what until this time had been a British colony to China.  It is said to have then been among the first institutions to get a Qualified Foreign Institutional Investor quota in 2006.

Last year Edmond de Rothschild named Jing Zhang Brogle to head up its Hong Kong private banking operations, luring her from another Swiss bank with an Asian business, Vontobel.

As reported here in October,  Australia’s Australia & New Zealand Banking Group said it planned to sell its retail and wealth-management businesses in five countries in Asia to Singapore’s DBS Bank, to focus instead on institutional banking in the region, as it looked to “focus on attractive areas” in the market in which it would be able to “carve out winning positions”.

Earlier this year,  the  UK-based Barclays banking group sold its private banking business in Singapore and Hong Kong to Bank of Singapore, the wholly-owned private banking subsidiary of Singapore’s OCBC Bank. In 2014, France’s Société Générale sold its Asian private banking operations to DBS.

Earlier this week, LGT, the Liechtenstein private bank that had its origins as the family office of Liechtenstein’s royal family,  announced that it was to acquire ABN AMRO’s private banking business in Asia and the Middle East, giving it new private banking outposts in Hong Kong, Singapore and Dubai, with approximately US$20bn in total assets under management.

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