Category Archives: Uncategorized

When is a threat not a threat?

By Kirstin Ridley

British bankers are not threatening to head for the Swiss hills. But that doesn’t mean they won’t pack their bags. So says Angela Knight, the head of the British Bankers Association.
Knight told the Reuters Future Face of Finance Summit that if British-based banks such as HSBC, Barclays and Standard Chartered consider whether to keep headquarters in London – given the banker bashing, punitive taxation and pay restrictions imposed here -- that is merely a fact.

Speaking one day after Europe’s largest bank HSBC cut profitability targets as tougher bank regulations eat into earnings, Knight conceded that she did not expect banks to move lock, stock and barrel to Geneva – and that images of jumbo jets laden with London bankers in pinstriped suits were mere “cartoons”.
But she said the simple truth was that the British economic growth lagged that of peers, while fixed costs were rising. Britain was not an obviously attractive place to be for bankers.
To remain an international financial centre, the country needed to be clever and get its regulation right. Banks, she said, were just telling it as it is. “Is there an expectation that employment in banking will be reduced? Yes … Is there an expectation that sentiment will turn around? No,” she said. “We are living in a country and a region where the costs of operation are high and (there is) a lot of personal condemnation (of the banking industry)... so I think that we cannot pretend that somehow that has no effect and no impact.

“Why anyone calls it sabre rattling, I do not know, other than the fact that they must themselves be in denial,” she said. “Because these are just facts. These are not threats, they are not sabre-rattling. They’re not pretence. They are straight forward facts.”

David and Goliath had an easier time of it in the comparison stakes

By Huw Jones

The planned merger of Deutsche Boerse and NYSE Euronext will create the world's biggest bourse with 90 percent of on-exchange traded derivatives in Europe.
It has certainly focused minds and boosted CEO airmiles.
Speakers at the Reuters Future Face of Finance Summit were upbeat about their chances of winning a slice of this market which shows more promise for the bottom line than share trading, where competition is as ferocious as margins are thin.
Chi-X Europe, busy finalising its merger with BATS, took time out to explain how it too is targetting derivatives -- believing that a heady brew of shares, futures, options and ETFs on one platform will turn trading heads their way.
Last week saw the London Stock Exchange unveiling plans to turn its Turquoise pan-European platform into a derivatives winner too. And LCH.Clearnet, the clearing house, also sees
derivatives as the future.

The only way is up, it seems.
"The important thing in these markets is it's not about first mover advantge," is how Chi-X Europe CEO Alasdair Haynes bravely puts it.
LCH must also be hoping that is true -- it wants to clear credit default swap trades, a niche ICE has largely to itself in Europe so far.
And the clearer's CEO Roger Liddell hopes there will be an opportunity to clear derivatives linked to the STOXX indices --which are currently cleared and partly owned by Deutsche Boerse's Eurex.
So all well and good.
If you have a killer contract everyone wants to trade, that is.
Deutsche Boerse's Eurex was able to bulk up its derivatives volume in the Bund contract. Euronext's LIFFE has short term interst rate derivatives in the bag for now.
On-exchange derivatives contracts are proprietary, unlike shares which have no patent and can be traded by any platform.
Past efforts to create new derivatives contracts have often run into the sand as turnover failed to materialise.
It may be a case on being able to bring a horse to a new derivatives platform but it will be harder to persuade it to drink unless the liquidity is there.
So far, nobody has a compelling answer to that dilemma.
Huw Jones, Reuters London

Are the days of flying business and 4-star hotels over for biz travelers?

Are flying coach and staying at budget hotels the "new normal" for businesspeople who travel for work? If so, what does it mean for airlines, hotels and casinos still trying to recover from the economic downturn? Chris Woronka, Senior Gaming, Lodging and Leisure Analyst at Deutsche Bank Securities shares his thoughts with us on what's in store for the Travel and Leisure Industry in 2010. Will the industry once again be flying high? Or, will the prospects for a better year ahead get grounded?

2010 Travel and Leisure Industry Outlook

Dubai crisis will not spread, says Invesco’s Garnick

dubaiDubai's financial problems have spooked investors around the world. Moody's Investors Service didn't help matters on Wednesday when it said it would review the ratings of  not just of Dubai, but of neighboring emirate Abu Dhabi and the federal government of the seven-member United Arab Emirates federation. Dubai and Abu Dhabi are both part of the UAE, the world's third-largest oil exporter.

But Invesco's sassy market watcher, Diane Garnick, says the crisis isn't likely to spread. Based on her past visits to Dubai, which she dubs a "Las Vegas-wannabe," she expects little fall-out for other world markets.

"The one thing that Dubai completely aced about Las Vegas is that what happens in Dubai stays in Dubai," she said during an interview at the Reuters Investment Outlook Summit in New York.  "This crisis won't spread." 

Investors should have been wary of Dubai all along, she added,  since the hotel construction boom was built without enough other attractions to pull in tourists.  "It's like a tour of different hotels -- that's all it is," says Garnick, who's based in New York. Atlanta-based Invesco oversees about $419 billion for retail investors and institutions.

Time private bankers got professional

It's hard to imagine that a banker who represents multimillionaires would be anything but professional - but a top executive at a leading global bank thinks that's precisely the wealth management industry's problem.

"There is so much mediocrity in the industry we have to raise the bar here," said Gerard Aquilina, vice chairman of Barclays Wealth, at the Reuters Global Wealth Management Summit in Geneva.

    To Aquilina's way of thinking, private bankers need the same "institutional rigor" as investment bankers in the way they operate. To this end the bank is looking to pursue only top-quality hires.

"Our strategy is not to be the hoover that comes and hires willy-nilly, we want to be much more selective," said Aquilina -- perhaps an ironic view given Barclays acquired thousands of investment bankers from the ashes of the fallen Lehman Brothers last year.

    But he and his colleagues are so sure of their position that he said they are working on developing MBA-level courses with some unnamed top universities on private banking, especially as they see fewer and fewer interns turning up their noses at the prospect of a three-month rotation in the private banking shop.

    They're not alone, either. Alexander Classen, head of EMEA wealth management for Morgan Stanley, said his firm too was seeing more and more people turn up to recruiting presentations on college campuses, whereas at one time they would have summarily shunned the private bankers for the investment banking sessions.

Things may have changed since then, but private banks may still have their work cut out if they want to attract talent early. After all, as Aquilina himself admitted, "There are not many people at eighteen who say, 'Hey Dad, I want to be a private banker'. Most people just fall into it."






Everyone needs a private banker

Everyone needs a private banker. Full service means exactly that for one speaker at the Reuters Wealth Management Summit. The 'normal' range of extras that wealth managers are offering super-rich clients under the banner Lifestyle Management has expanded as they scramble to keep on board clients whose massive wealth was rendered a little less massive during the financial crisis.
Citigroup's private banking arm keeps an art curator on staff to make sure clients don't overspend at auctions and maximise the value of their collection - it's a real problem apparently.
But one of the smaller banks represented at the summit goes a lot further than that. "We do pretty much whatever they want." On further investigation this stops short of walking the dogs but it does include managing fleets of vehicles, relocation for tax exiles, school selection for the rich in-waiting, wine cellar stocking, art advice (of course) and payroll services for the hired help.
But what was the most unusual request he has ever had from a client? "We were once asked pick up some strange medication and we organised the redecoration of the interior of a private jet in questionable taste," said one private banker. He wouldn't say any more, but some might think that was too much detail already.

Private bankers chanting new mantra

Private bankers still getting their ears bashed from clients enraged about massive portfolio losses now are chanting a new mantra.

    Murmur along with me, those seeking inner peace and appeased clients: the word is “holistic".

Three years ago, before Lehman and Madoff shattered clients’ confidence, the soothing formula might have been "absolute returns" or "structured products". No longer. 

    Bankers shooting French cuffs in Super 180 suits and obsessed with spread sheets now are seizing on a word redolent of green tea, acupuncture, crystals and the New Age. 

    "Holistic" bubbled up at least four times at the Reuters Global Wealth Management Summit as bankers and consultants in Singapore and Geneva outlined how to keep clients after the market meltdown. 

    But what does a word meaning that whole entities have an existence other than the sum of their parts have to do with rich people and the gnomes that mind their money?

    "Holistic" in bank-speak translates as handholding, face time and hustling to assure wary clients bankers are on the job. Mass mailings are out, daily phone calls are in.

    The results have yet to be seen but bankers hope their "holistic" approach will prove to be more than the sum of its parts.

Private Bank finds synergy in public bar

It is a little known fact that private bank Wegelin, Switzerland’s oldest bank is also active in the bars and restaurants business.

In its ‘Nonolet’ bars – a play on the Latin saying pecunia non olet (money doesn’t stink) - in St. Gallen and in Geneva, hedge fund managers and other financial professionals rub shoulders with other locals in the early evening over sparkling wine or champagne and snacks.

It may sound an odd sort of diversification, but Wegelin says there were forced to try a new line of business to ensure an upmarket crowd mingled on the ground floor of the Wegelin building.

“You cannot have a strange business there like a kebab shop,” said Wegelin partner Christian Raubach.

Wegelin was forced to launch a hostile takeover on a local bar which had attracted a lot of unruly drinkers near its St. Gallen branch office.

“We bought the bar, we fired the owners, and we put a nice Café in so we get a different crowd. The crowd that sits during the day drinking coffee and not vomiting drinking beer at night,” Raubach said.

The operation proved to be a success but is unlikely to develop in to a brand new business area.

“Everybody thinks Nonolet is probably very profitable..let me tell you private banking is a much better business,” Raubach says.

Swiss brand key to banks’ cache

One question kept coming up when I announced four years ago that I was moving from Washington to Geneva: "Will you get a Swiss bank account?"
There is an unmistakeable international cache surrounding Switzerland's financial sector, whose infamy as a hiding place for Nazi gold has given way to Hollywood mystique about secretive numeric codes cracked by Da Vinci Code protagonists and James Bond. 
But within the small Alpine country, which remains stubbornly outside the European Union despite sharing borders with France, Germany, Austria and Italy, bankers are in fact celebrated for being as dull as they are discrete. 
Christian Raubach, managing partner of Switzerland's oldest bank, Wegelin & Co, told the Reuters Wealth Management Summit that the biggest Swiss banks rely on their "Swissness and security and boringness" to attract clients from abroad.
Guillaume Lejoindre, managing director at the Swiss private banking arm of France's Societe Generale, said it was precisely this reputation that made Switzerland such a powerful financial power, even in an age when total secrecy has been abolished and big institutions like UBS admit to taking big risks akin to those that took down Lehman Brothers. 
Droves of Saudi and Gulf banking clients file into Geneva to spend the summer with their families every year and wealthy Latin Americans are also clearly inclined to store their funds in Switzerland to try to make them less likely kidnapping and extortion targets.
The strong overall brand means that the banks can charge a premium over other centres and also continue to draw in new funds even in dark economic times.
 "What is the price of trust and confidence? What is the price of expertise? We all know that a Hermes bag is more expensive. Is it a problem? I don't think so," the Societe Generale executive said. 
In this way, much like Swiss watches, Swiss hotels, Swiss chocolate and Swiss beauty creams, the biggest asset even the most endowed Swiss bank has is clearly its brand -- which may actually hold more value internationally than at home.

No-frills travel is on for private bankers

The days of luxury VIP lounges are gone for many private bankers, as the crisis forces them to travel economy to save money.

Thrift has become the new mantra for private banks and, like with many other industry segments already, getting out of the office is allowed only if there are clients to meet.

"We are making sure everything we do is efficient. We travel economy now," says Samir Raslan, Region Head for Central, Northern Europe, Africa and Turkeyat Citi Private Bank.

Citi, one of the big wealth management players that was hit hard in the financial crisis, has gone on a slimming diet and cut about 25 percent of costs and about 20 percent of stuff in the last year.

Raslan says he does not see any more cost cutting, but the no-frill travel rule stays.