Indian wealth firms poach to fight their foreign rivals

While Standard Chartered and other foreign rivals are unveiling plans to hire hundreds of private bankers and open new offices across India to boost business, some such as Deutsche Bank and Morgan Stanley have lost senior executives to Indian rivals.

This is unlike other emerging markets such as Indonesia, where specialised banking for the rich is a relatively new phenomenon and local banks are often unwilling or unable to match their foreign counterparts in the salary stakes.

“Foreign banks, which have demonstrated strong abilities in developing private bankers, often struggle to retain them due to aggressive hiring by leading local bank competitors,” Donie Lochan, partner at management consultancy Bain & Co, said in a reference to India.

Merrill Lynch-Capgemini, in its annual report on wealth, said the combined wealth of Asia Pacific’s high net-worth individuals (HNWIs), or those with investible assets of over $1 million, is estimated to grow at an annual rate of 8.8 per cent until 2018, faster than the global average of 7.1 per cent, with China and India likely to lead HNWI growth in Asia Pacific.

Financial advisors
Consultant Bain estimates India has around 115,000 HNWIs, less than 20 per cent of whom have financial advisers. Recent departures from Western banks to local rivals include Nikhil Kapadia, who left Deutsche for Avendus Capital in January, and Anshu Kapoor, who joined Edelweiss Capital from HSBC.

Sutapa Banerjee, who left ABN AMRO Private Bank last year to head the wealth unit of India’s Ambit Capital, said her decision was prompted by the opportunity to grow a new business and the monetary benefits that would appear if she succeeded. “The freedom that you have to be able to make decisions and be quick-to-market is far easier in a local entity,” she said. “You accept the challenge of creating something out of nothing, with the proviso that you partake of the riches you create.”
Besides boutiques, foreign private banks also face competition in India from domestic companies such as Kotak Mahindra and ICICI Bank, which have better local knowledge and distribution networks.

But most of world’s big private banks appear undaunted so far by the competition, and Societe Generale, Credit Suisse and Morgan Stanley are among those that are steadily growing their onshore presence in India. Ambit’s Banerjee said casualties were inevitable, given the number of new entrants. But she added a shakeout was probably 4-5 years away as the market is growing rapidly. Big global private banks do, however, have an advantage over Indian rivals in terms of brand recognition along with a perception that their staff are better trained.