BNP Paribas senses growth opportunities among Middle Eastern and German elites

Both French and global firms are “very concerned” about the impact of Brexit on their business, as the UK is such an important market for them, says Rémi Frank, head of the ‘key client’ group at BNP Paribas Wealth Management, the Paris-headquartered private bank which manages assets of €361bn ($409bn) globally.

Mr Frank’s team of 130 private bankers dedicated to serving ultra-high net worth clients in Europe, Asia, the Middle East and Africa, handles about a third of the total.

Yet these worries have not stopped clients from taking advantage of the so-called “Brexit trade.” Like global customers of their bigger, better known European rival, UBS, many BNP Paribas clients have profited from the double hit of slipping sterling and the weakness of London prime property prices.

“There was a connection quickly made by many of our dollar and euro-based clients that it has been easier for them to buy real estate in London since Brexit and that still holds today. Interest in London is coming from everywhere on the planet,” says Mr Frank, who works predominantly with ultra-high net worth clients and single-family offices. The bank oversaw a €11.4bn inflow of client money during 2018.

Asian and Middle Eastern clients have been the most prominent of his clients to buy in London, but there has been much interest from other European countries too, he adds.

These clients are typically sourced through the BNP Paribas group, says Mr Frank, with good starting points including corporate and investment banking units, but also the retail banking and custody networks featuring prominently in the referral machine.

He acknowledges that many outside observers may not understand the importance of global custody platforms, also leveraged to great effect by US banks such as Northern Trust and the Bank of New York, which plug wealthy families into the architecture, technology and financial analytics built for institutions.

“BP2S [the securities services arm of BNP Paribas] have a lot of people on the ground, working on custody for the big family offices,” he says. The strength of the French bank’s real estate arm is also not to be underestimated.

“Initially, we are trying to leverage what we can internally,” says Mr Frank. “But then on top of this, every relationship manager is trying to build their book of relationships, but the best way to meet new clients is to be recommended by existing clients.”

Entrepreneurs

Typically, most of the wealthy clients Mr Frank deals with will want to use the French bank’s investment banking expertise, M&A advice and corporate loans too. Many are cash rich, having sold companies and are now more interested in portfolio management. This is the emerging trend – with these investors still maintaining the entrepreneurial mindset that helped them build their companies – rather than the inherited wealth of old.

“Not all of them are entrepreneurs, but this is the growing segment of our business,” says Mr Frank, labelling entrepreneurs globally as his bank’s “top priority”.

Much of his bankers’ time, he suggests, is spent looking for business people who have just sold or are about to sell their enterprises.

“It is difficult to get your hands on the money from a family which has already invested with a number of banks,” he suggests. “If somebody is exiting, selling their company, that is the best time to attract them. It is new money that is arriving, so you don’t need to transfer it from one bank to the other.”

Persuading clients to switch relationships between banks is the hardest task of all, whatever many rival firms claim, he says. “All the clients in the world have relationships with banks, but it is easier for us when this family cashes in a $500m shareholding for us to get a hundred of this, than if the money is already with Credit Suisse or UBS and we have none of it.”

New wealth has been predominantly sourced by the bank in developing markets in recent years, although not exclusively so. “For the last five or six years, we have invested a lot in Asia. The bank is well positioned there,” enjoying a “big booster” of late, says Mr Frank. “We have employed a lot of talented people there,” he says, particularly emphasising the role of Mignonne Cheng, who built up the business from Hong Kong, for seven years, before handing over the CEO role to Pierre Vrielinck in April 2017.

“Our main growth has come from Asia and we will continue to invest there, but it’s easier to get 30 per cent growth in a new base, such as the Middle East. We were not at the right level there previously, compared to the rest of the world.”

The bank hopes that will change now as management is taking the Dubai project seriously as an expansion story. “We now have the right people in place, who have experience dealing with non-resident Indian (NRI) clients in Asia,” says Mr Frank. He trusts the team, managed by regional CEO Masroor Batin, to advance the Middle Eastern business on perhaps a slightly “lower scale” than the Far East, playing down high expectations at head office. Mr Batin previously led the bank’s NRI teams in Hong Kong and Singapore. The bank describes Dubai as “a dynamic hub for wealth management activities”.

Teutonic target

The market which the energetic Mr Frank is most optimistic about is however a more established private banking heartland, closer to home, in the middle of Europe.

“Germany is still the largest economy in Europe,” he says, with a wistful look in his eyes, dreaming about how large this market can grow. This one is more of a personal challenge for Mr Frank, who took charge of the German operation initially, building up a 40-strong force of private bankers last year.

“We have a big team in place and are starting to gain trust and open accounts. We are well positioned as the leader of wealth management in Europe, but we were not in the biggest country in Europe and that was something we had to correct,” says Mr Frank, showing the resilient, long-term mindset the German programme of expansion will require. “There was a gap. When you want to be the leader in Europe, you cannot ignore Germany.”

The Teutonic market forms a key pillar of BNP Paribas group priorities, he explains. “From a group point of view, Germany is now at the top of the development list, like Asia was in 2012. Then it was part of the group plan to grow Asia massively. Today it is the group plan that Germany must be grown, significantly.”

The group identified Germany as a strategic target in 2014, aiming to achieve 8 per cent annual growth there each year, to reach €2bn in revenues by 2020. Relationship managers have since been recruited from major German banks. “We have persuaded leading players in the industry, who already had a job, to leave their current employer for a bank with a name, but no activity in wealth management in Germany,” says Mr Frank, showing immense pride in his recruitment drive.

The operation there is now being masterminded by Michael Arends, previously with Bethmann Bank – ABN Amro’s German wealth franchise – and before that at UBS. “In Germany, if we didn’t have the franchise in corporate and investment banking, we would not have gone out on our own in wealth management and been able to hire 40 people,” he says.

The plan is now to boost numbers of bankers to 150 within three years, targeting wealth generated by Germany’s ‘Mittelstand’ segment of small and medium-sized firms. The biggest draw for BNP Paribas in Germany is the bank’s real estate franchise, confirms Mr Frank.

Family fortunes

As well as targeting these geographical segments, Mr Frank understands his work must take him closer to the families which control the wealth, especially the younger generation, whose fortunes are closely linked to those of the family firm.

“Many of them want to demonstrate to their parents that they can succeed independently,” he says, before perhaps taking over the family business at a later stage. “They want to show they can be entrepreneurs too.”

Bringing these young entrepreneurs together in both live and electronic forums is also an increasing part of his work in serving the world’s wealthiest families.

The latest development involves connecting billionaires living in different continents. “European families want to know how their peers are doing in Hong Kong or Brazil. We bring them together at the Opera in Paris or the Roland Garros tennis tournament and get extremely positive feedback, especially from our Middle Eastern clients.”

The bank has now digitised this process through its Leaders Connection app, facilitating an electronic network of its wealthiest clients, after putting them through a stringent KYC process. This system of networks and peer-group validation is clearly becoming a strategy for future growth at private banks and BNP Paribas is taking the lead with this approach.

“Within a country, ultra-high net worth clients often get together. They know and trust each other, sometimes they will trust another family more than a bank,” admits Mr Frank. “We can have the best due diligence team but if another family tells them about an investment, they will listen to them more than they do to us.”