"Our business growth is about not being everything to everyone"

Friday, January 21, 2011

Latin America suffered to a lesser degree the heavy losses that the financial wealth of high net worth individuals (HNWIs) saw globally in 2008. The number of HNWIs in Latin America hit 500,000 in 2009, and their combined wealth was US$6.7tn at the end of that year, up 15% on 2008. Experts believe that the region's wealth will continue its robust growth path, with Brazil leading the way.

BNamericas spoke with John Leto, head of private banking in the Americas for Standard Chartered, about growth prospects for the wealthy in Latin America and about the UK bank's strategy to grow in this segment.

BNamericas: What is Standard Chartered's approach to the private banking business in Latin America?

Leto: We're pretty comprehensive in our coverage model, but we have a geographic focus in Brazil and the Southern Cone. We also feel strongly that we can serve wealth-creating entrepreneurial clients in specific segments that have the need to have direct access to Asia, Africa and the Middle East, where we have a tremendous footprint.

Some of our large clients have not only the need to have access to firms that they may want to do business with in Asia, but they also want to diversify their portfolios so that they can have investments [there]. Standard Chartered Private bank has the ability to meet both their professional and personal needs.

BNamericas: What rate of growth are you targeting over the next few years?

Leto: Since the acquisition of American Express Private Bank, there has been a significant change in strategy and direction. Unfortunately I cannot disclose specific numbers, but we have an intention to grow our business dramatically. But our business growth is about not being everything to everyone [as in the case] perhaps of some of our competitors; we're very focused on specific types of clients with specific clients. Many of our competitors will tell you that they're going with certain clients with certain levels of wealth. For us, it's not about the size necessarily of their wealth, but also about the type of industry they come from and whether we can serve their needs given our footprint and our capabilities.

I would say doubling the size of our assets in two years would be about what we'd like to do, but my aspirations are working closely with clients that have the need to have exposure to Asia, Africa and the Middle East, rather than selling products.

BNamericas: What differences are there between the wealthy investors throughout Latin America?

Leto: Chile tends to be very conservative, and our Chilean network clients are much more future-focused. They're interested in investing, in portfolio analysis, while Brazilians clients are more day-to-day "transactors;" they might be more interested in fixed income. But we have found that our Latin American clients are becoming more interested in research, for example, because we understand Asia so well and we know companies in Asia and we are actively researching those companies. A lot of our companies want to do research and perhaps do single security research, both from an equity and fixed-income standpoint. They also want access to some deals that we might have, where they might be able to co-invest with us. But in general they're also interested in the kind of firms we have - for example, a fund that enables them to invest in Asia ex-Japan. So it's a fairly broad offering.

We're set up most appropriately for customers that have US$5mn in investable assets, but we are not a scale business, with hundreds of private bankers in Latin America. Our model is more based on intimacy. So for us, understanding a person's industry makes our relationship with them deeper, so we can understand what kind of risks are associated with a person who's in agriculture as opposed to someone in mining or in real estate. But we're not going to get involved in their industries necessarily, although we can help them through other parts of our organization. We are going to work on their personal side. But our understanding the whole picture makes us better bankers. Also, many of the wealthy in Latin America are entrepreneurs, with their personal and professional lives are very closely tied.

BNamericas: What factors do you see driving wealth growth in Latin America over the next few years?

Leto: We have a very strong opinion on the Latin American wealth market. As I said before, it's focused on a few countries. Clearly the largest wealth market in Latin America today is Brazil. Something like 70% of Latin America’s market cap and 50% of the US$2tn Latin America wealth market reside in Brazil, Chile and Argentina, and that helps us focus our geographic strategy. We feel that there's tremendous growth potential in the emerging markets in general, with Latin America being a large part of that. During the volatility that occurred over the last two years, investors in Latin America had the least impact among wealth investors worldwide. And I think the wealthy Latin American are more conservative and risk-averse than your typical wealthy investors, which by the way makes my job a lot easier because I prefer to work with clients that are thoughtful and look to balance their portfolio.

BNamericas: What strategy will Standard Chartered follow in Latin America in this segment?

Leto: I think it has a lot to do with the tie-in of the emerging markets in Asia and Africa. And that's why we think we are really well-positioned as a firm, because as growth occurs in Asia, there will be significant needs for infrastructure investments, commodities, needs for food and agriculture. And we think Latin America will be a tremendous source of commodities and agriculture for the emerging markets, and that will simulate the economies in Latin America.

BNamericas: Could you consider growing though acquisitions in Brazil or other parts of Latin America?

Leto: We are absolutely committed to Brazil. In 2010, we established our investment bank there. We have our license in place, we have grown significantly and our brand is becoming better known. We have private banking capabilities in Brazil, and I think that all options are on the table to grow organically or inorganically. Standard Chartered's preference is to grow organically, but I believe that as the needs arise any option is on the table to grow in Brazil.

About the company

In February 2008, Standard Chartered bought American Express Bank from American Express for US$823mn, leaving the UK bank with some US$6bn in assets under management in Latin America. In the region, Standard Chartered has private banking offices in Uruguay, Chile and the Cayman Islands.