Exclusive outtakes from industry leaders
While wealthy clients remain ultra-cautious about real estate, some are being tempted to snap up trophy properties that promise to throw off a healthy amount of cash.
On the fringes of the Reuters Global Private Banking Summit, Banco Santander executives said they had been involved in six to eight large real estate transactions including the sale of a Miami marina in this year.
In another deal, a Mexican client snapped up a chunk of distressed commercial real estate in Spain from a seller seeking to cut leverage. The properties were returning more than 6 percent in cash flows, a healthy spread over the buyer’s 4 percent borrowing costs.
More recently Santander private banking unit Banif assisted a client in the sale of the Valderrama golf course in Spain to Australian golfing legend Greg Norman.
With the German government hot on the heels of untaxed wealth stashed in Swiss bank accounts, and the U.K. government taking a tougher stance on clawing back bonuses, rich folks will likely head for the hills – or the Alps to be more precise – senior private banking executives said in Geneva.
“People are going to arbitrage different tax jurisdictions. We are going to see European clients moving to Switzerland, very large families,” said Alberto Valenzuela, deputy chief executive of Societe Generale Private Banking (Suisse) SA.
How rich is rich? For most people, the answer is simple: ”not me.” But for private bankers keen to handle the assets of the well-heeled from Moscow to Malibu, that question is a slippery one. Sometimes a simple number won’t do, either.
Just about every executive at Reuters Global Private Banking summit in Geneva has a different standard for what those in the business call “ultra high net worth individuals”, the really rich that are the industry’s prime catch.
The credit crisis prompted a well-documented exodus of client money from risky assets into safer ones like government bonds, cash and gold.
But some rich clients of private banks would have preferred to take their money and run.
They were so rattled by the threat of financial instability to their wealth that they wanted the reassurance of having as much of it as possible in a form they could hold in their hands and count: banknotes.
Wavering confidence in the financial system led some to consider taking out their entire cash balance and holding it in banks’ vaults in physical notes, said James Fleming head of international business at British private banking blue-blood Coutts.
“That was a request on three or four occasions at the height of the crisis when everybody was concerned about the balance sheets of the banks generally, not us specifically,” Fleming said.
“We cautioned against holding cash in the vault,” he said, adding: “They didn’t do it.”
Private bankers remain in demand in some key European markets, but they will have to live with lower salaries if they want to continue to be part of this business.
Top wealth managers told the Reuters Global Private Banking summit that they have stopped offering the huge packages seen in the run up to the financial crisis of 2008-2009.
“We are not offering packages that are outlandish. And I do not see the other banks doing that either,” said Samir Raslan, General Manager of Citibank (Switzerland).
Raslan said the structure of banker’s salaries had also changed. Relationship managers who form the backbone of a private bank’s workforce were getting higher fixed salaries than before, but no more huge bonuses.
“We see more rational hiring, rather than aggressive, open cheque-book hiring,” said Raslan.