THOSE who opt for the privilege of a private bank to handle their often complex financial affairs are in good company. The Queen is the most famous client of Coutts, owned by Royal Bank of Scotland, while tennis star Andy Murray is believed to bank with Adam & Co.
They are among a rising number of wealthy individuals who are feeding a growing sector of a banking industry otherwise reeling from the effects of the credit crunch.
Scotland is seen as fertile territory for private banking with an estimated 12,00
0 millionaires enjoying the fruits of soaring property values and the oil boom. No wonder the country is becoming a hotbed for wealth managers, with Rensburg Sheppards Investment Management and Williams de Broe both opening offices in Edinburgh this year.
HSBC is the latest to pursue these asset-rich entrepreneurs, celebrities and estate owners north of the border.HSBC Private Bank officially launched last week, primarily targeting individuals with at least £1m of investable wealth. HSBC PB said it would be happy to have just 500 clients in Scotland; but that would equate to at least £1bn of assets, an indication of how valuable this business has become.
Declan Sheehan, chief executive of HSBC PB in the UK and Channel Islands, said the bank had decided the time was right to serve its Scottish clients from Scotland: "In Scotland, there has been fantastic growth in wealth, and not just in Edinburgh, but also in Aberdeen – because of oil – and Glasgow."
HSBC PB manages $220bn in private client assets and has a global market share of between 1.5% and 2% in a fragmented industry in which the top five – UBS, Credit Suisse, JP Morgan, Citibank and HSBC PB – account for just 10% of the world market.
Joss Mitchell, head of HSBC PB in Scotland, is confident there is enough demand to merit the dedicated office in Scotland, as more money is coming into the country through ex-pats returning to their homeland.
"Some of these people may have started in Silicon Glen before going overseas to make their fortune. They are now coming back and have offshore money that requires international banking," he said.
Amid reports of massive job cuts in the United States and the sub-prime crisis reverberating around the world, private banks say their business is holding up, although customer requirements are changing.
Chris Meares, chief executive of group private banking at HSBC PB, said: "In Asia people tend to trade every day, but we've seen a slowdown as they look at where the market is going and put more money into cash. We've been telling customers not to panic. It's well proven that those who sell when things are going down invariably do so at the wrong time."
He argues there are opportunities in sectors such as commercial property, which has been hit hard by the market downturn, and residential property, where prices have been starting to fall.
But the UK Government has not done much to encourage wealth to stay on these shores, having pressed ahead with its levy of £30,000 on non-doms who have stayed for more than seven years.
Like many, Meares saw the Chancellor's statement on non-doms as "rather rushed", and while he says nobody objects to paying a certain amount of tax for services used, the wider contribution that non-doms make to the wider economy should be noted.
HSBC PB launches into a Scottish market where, arguably, the best-known name is Adam & Co, launched in 1983 and bought by Royal Bank of Scotland in 1993. It has a market share of about 12% and the best geographical coverage of a private bank north of the border, with offices in Glasgow and Aberdeen, as well as Edinburgh. Its pre-tax profits rose 23% to £20.7m in 2007 and deposits were up 9% to £2bn.
According to its managing director David Crathie, Adam & Co attracts those looking for a more traditional approach to banking, offering a personal service and, for those who care about such things, a distinctively branded chequebook.
RBS also offers the Royalties private banking service targeting "income-wealthy" individuals earning about £100,000 a year, rather than "asset-rich" customers with money tied up in estates, who may opt for Adam & Co.
The full article contains 722 words and appears in Scotland On Sunday newspaper.
