UBS AG, the worlds biggest wealth manager, is targeting millionaire clients in oil-rich Nigeria and Angola as Swiss rival Credit Suisse Group AG withdraws from some African markets.
The amount of people on the continent that fall within our wealth-management bracket is increasing every day, Sean Bennett, the Johannesburg-based managing director of UBS in sub- Saharan Africa, said in a Nov. 20 interview. Theres still tons of opportunities still relatively untapped.
UBS is vying with Swiss banks from Julius Baer Group to Pictet & Cie. for emerging market millionaires as a global crackdown on tax evasion forces European and American clients to withdraw funds. While Bennett sees potential to woo super-rich customers in Ghana, Kenya, Ethiopia, Uganda and Botswana, Credit Suisse is planning to withdraw from 83 markets, including Angola and the Democratic Republic of Congo, to cut costs.
The UBS strategy has been that you win market share by being onshore and for a long time, said Sebastian Dovey, managing partner at London-based research company Scorpio Partnership. Credit Suisse is a smaller operation than UBS and is looking to pick its markets.
UBS Chief Executive Officer Sergio Ermotti is prioritizing boosting profit at the Zurich-based banks wealth-management unit as he cuts 10,000 jobs and shrinks the investment bank by exiting most debt trading. UBS, which tops Scorpios 2012 ranking of wealth managers with double the $855 billion of assets of fifth-placed Credit Suisse, wants that business to contribute half of pretax profit by 2015.
AFRICAN POTENTIAL
Africa, where Nigerias Aliko Dangote ranks 35th on a global rich list, according to the Bloomberg Billionaires Index, may provide part of the answer. The industries contributing most to wealth creation on the continent include telecommunications, consumer, agriculture and resources, said Bennett, 44, who rejoined UBS from HSBC Holdings Plc in 2011.
The number of Africans with at least $1 million of investable assets climbed 9.9 percent to 140,000 in 2012, according to a report published on June 18 by Cap Gemini SA and Royal Bank of Canada. That was the fastest rate of increase outside North America as the economies of countries such as Nigeria and Ghana grew at more than 5 percent last year.
There are a lot of countries that have become increasingly interesting investment opportunities, said Bennett, who is targeting Africans with $3 million of investable assets. Theyve all got challenges, but theyre all on the right trajectory.
NET INFLOWS
UBS said last month that net inflows from wealthy clients in its emerging markets division, which includes Russia, eastern Europe, the Middle East, Africa and India, slowed in the third quarter. Net new money from those regions was 600 million francs ($660 million) in the period compared with 2.4 billion francs a year earlier, the bank said.
UBS fell 0.3 percent to 16.54 Swiss francs as of 3:27 p.m. in Zurich trading, paring this years gain to 16 percent. Credit Suisse rose 0.8 percent to 26.32 francs, taking the stocks advance over the same period to 18 percent.
Credit Suisse, which is scaling back its securities division at a slower pace than UBS, is ending relationships with offshore private banking clients from 83 countries with total assets under management of about 3 billion Swiss francs, Chief Financial Officer David Mathers said last month. The bank didnt disclose specific countries, which have an average of 40 million francs to 45 million francs of assets.
COMPLIANCE COSTS
Given the height and complexity -- and compliance costs associated with the numerous regulatory regimes in each country -- we have reassessed the viability of doing business in these small markets and believe these resources will be better allocated to other growth areas with higher potential, Mathers said.
Vanessa Neill, a spokeswoman for Credit Suisse in London, declined to comment.
The bank will service sub-Saharan Africa ultra-high-net- worth clients, who have more than 50 million Swiss francs of investable assets, from Johannesburg. Credit Suisse also has a representative office in Cairo.
Credit Suisse seems to have taken the view that some of the smaller African countries are not materially advancing the companys position, said Dovey of Scorpio. Its refreshing that there are two separate strategies between UBS and Credit Suisse because historically the industry has taken a follow my leader approach and that didnt always work.
SELECTIVE GROWTH
For the moment, Bennett sees Credit Suisse providing competition in Africa, along with banks, such as HSBC.
Wealthy African clients usually book assets in London and Switzerland, David Bruegger, a Zurich-based spokesman for HSBCs private bank, said in an e-mailed response to questions.
We reckon that there is potential for selective growth in the African emerging markets, primarily South Africa, Nigeria and Kenya, for international banking, subject to local cross- border regulatory requirements, said Bruegger. HSBC declined to provide figures on net inflows or client numbers.
Nigeria, the continents biggest oil producer and second- largest economy after South Africa, may expand 6.75 percent next year, the countrys Finance Minister Ngozi Okonjo-Iweala said last month.
Nigeria is obviously the hot market, but Kenya is also producing a lot of wealth, although its still a relatively small market by comparison, Bennett said.
OPPORTUNITIES OVERLOOKED
Kenyas growth may accelerate to 5.6 percent this year, the fastest pace in six years, according to Treasury Secretary Henry Rotich. Angola, Africas second-largest oil producer after a civil war ended in 2002, will probably grow 5.1 percent this year, President Jose Eduardo dos Santos said last month.
There is very strong wealth-management business, onshore and offshore, emanating from the likes of Nigeria, Kenya and Ghana, said Dovey. The two market regions were surprised that the wealth-management industry has overlooked are Africa, in parts, and Latin America, in parts, and theyve all been drawn to Asia in spades.
Wealth-management assets will increase with the next generation of the continents rich, said Bennett.
Because a lot of the growth is more recent, Africas entrepreneurs still have a lot of their wealth tied up in their businesses, he said. The second wave, where they start to monetize their wealth, is still relatively nascent.
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