Wed, Oct 17, 2018 page10

• Privatbank halved clients, but doubled AUM

  LARGER MANDATES: The group of German lenders in the past eight years grew its average AUM per client from 200,000 to 600,000 euros and predicts it will rise further

  • Bloomberg
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  The private banking arm of Germany’s cooperative lenders, a group of about 900 local banks with total assets of 891 billion euros (US$1.03 trillion), has almost halved the number of customers while also nearly doubling assets under management (AUM) within a few years.

  DZ Privatbank now takes care of more than 18 billion euros for the first time ever, CEO Stefan Schwab told Bloomberg in an interview.

  “We had 650 million euros in net inflows this year,” he said

  The lender counts about 30,000 customers, compared with 50,000 clients and 10 billion euros in AUM at the beginning of 2011.

  “We shifted our focus to larger mandates, which make asset management more efficient,” Schwab said.

  On average, AUM per client tripled from 200,000 euros to 600,000 euros over the past eight years, and could climb even further, as the bank seeks to hit 20 billion euros in AUM within two years.

  “Our inflows in new business have risen sharply,” said Schwab, who had previously worked at BHF Bank and Dresdner Bank. “When a customer came to us in 2011, he used to invest 200,000 euros or 300,000 euros. Today, it’s 1.6 million euros on average.”

  Most of the money comes from wealthy business owners, he added.

  Schwab sees the opening of branches and offices throughout Germany as positive for DZ Privatbank.

  “Until 2011, we only had two central locations in Luxembourg and Zurich. Without a broad geographic expansion, we would certainly have lost significance and funds in Germany,” he said.

  Today, the lender operates eight branches, including in Frankfurt, Hamburg, Dusseldorf and Munich.

  “Private banking has been and will remain a people business,” Schwab said.

  The company gets the majority of its customers through the local cooperative banks. They approach wealthy clients and arrange contacts to the group’s private bank.

  “The local cooperative banks receive up to 50 percent of the revenues from asset management, with the exact amount depending on how much they engage,” he said.

  Invested money can be booked at the local cooperative bank, at a branch or directly at DZ Privatbank in Luxembourg or Switzerland.

  Germany’s savings banks, the other big group of lenders in the nation, also has its own private banking arm called Frankfurter Bankgesellschaft, a subsidiary of Landesbank Hessen-Thuringen Girozentrale.

  Recently, the company opened a new branch in Dusseldorf. Assets managed for clients stand at more than 10 billion Swiss francs (US$10.12 billion), with the target being about 12 billion francs by the end of next year, a spokeswoman said.

  The roots of the private bank are in Zurich.

  DZ Privatbank, which went through a couple of mergers and takeovers over the years, is 91 percent owned by DZ Bank AG, which is acting as the central bank for cooperative lenders.

  The remaining shares are held by about 320 institutions of the cooperative banking sector in Germany.

  Last year, earnings before taxes totaled 20 million euros. A year earlier, the figure had only been 3 million euros burdened by special factors, compared with about 38 million euros in 2015.

  In August of this year, parent DZ Bank described the operating performance in its private banking segment as stable, but below target.

  DZ Privatbank still has some trouble with its Swiss unit. It has shrunk as part of a restructuring program and must work on improving its profitability, the lender said.

  Among other things, Schwab pointed to the abolition of the minimum exchange rate of 1.2 francs per euro in early 2015.
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