Private banks hiring at record pace as global wealth accelerates upwards

Private banks hiring at record pace as global wealth accelerates upwards
By Reuters - Friday, November 12th, 2010

Private banks will sharply expand headcount in coming years to capitalize on the growing number of wealthy individuals in Asia, dismissing concerns that aggressive hiring is out of sync with a tentative recovery in revenues.

Hiring sprees this year have taken some firms beyond their pre-crisis staffing levels, as banks believe growth in Asia, and robust revenues elsewhere, will support the expansion.

Citi for instance plans to add between 100 and 200 senior staff to its private bank over the next few years, Dena Brumpton, chief operating officer at its private bank, told Reuters.

"We see a lot of growth coming from Asia. But there will be selective hiring pockets in the EMEA (Europe, Middle East and Africa) and U.S. regions, too," she said in an interview.

The hires come on top of the 130 managing directors the bank added during the last 12 months.

The wealth of Asia Pacific-based individuals with investable assets of $1 million or more outranked Europe for the first time at the end of 2009, according to the widely quoted Capgemini Merrill-Lynch 2010 World Wealth Report.

Faced with tougher capital requirements in the wake of the credit crisis and mixed prospects for earnings, many investment banks are expanding their private banking units, a lucrative business where little capital is put at risk.

Barclays Wealth plans to double the number of high net-worth bankers globally over the next five years, said David Semaya, the London-based bank's head of private banking for the UK and Ireland.

Earlier this year, Barclays said it was pumping 350 million pounds ($565.2 million) into its wealth business as it seeks to grow the relative weight of the division.

Smaller private banking players are also eyeing expansion opportunities in both domestic markets and Asia.

Coutts, the London-based private bank owned by Royal Bank of Scotland, will make new hires in Asia over the next three years of a similar magnitude to the 150 added over the last year, a spokesman said.

The bank, which counts Queen Elizabeth II among its clients, will grow its UK team of roughly 330 by nearly 10 percent next year, adding to more than 20 people added this year.

OVER-ZEALOUS HIRING

Much of the hiring reflects rebuilding after banks, weakened by client outflows during the credit crunch, shed staff. But some warn that hiring may be running too fast ahead of a sustainable recovery in the business.

"First of all a bank has to have the assets under management to hire new people ... But recent private banking revenue numbers do not correlate to the increase in senior hires at most institutions," said wealth management specialist Sophie De Ferranti at headhunter Valens Goldberg.

"I think there is always a danger with an over-zealous hiring spree. The danger is you grow too quickly," she said.

Coutts' international sister company RBS Coutts, for example, lost 90 staff in Asia during the credit crunch, but the 150 hires undertaken this year mean staffing numbers have already surpassed pre-crisis levels.

Banks have posted mixed results at private banking divisions in recent weeks.

Barclays said this week that profits at its wealth division were up 9 percent compared with last year, while UBS stopped shedding client money in the third quarter for the first time since early 2008.

But RBS last week said total income at its wealth division, which includes Coutts, fell to 785 million pounds in the nine months to the end of September from 835 million a year ago.

Staff costs at the Edinburgh-based bank rose 36 million to 286 million pounds year-on-year.

Private banks also need time before reaping the rewards of aggressive hiring sprees, as new recruits battle to bring in fresh client funds.

"Banks need to give their private bankers time to gain traction. They need to give them between three to five years before they bring the assets in and become profitable," De Ferranti said.