“We cannot compromise on quality.”
(Photo: press photo)
Frankfurt The US financial giant JP Morgan has decided to significantly expand its offering for very wealthy customers in Germany. In industry jargon, this clientele goes by the abbreviation Ultra High Net Worth Individuals or UHNWIs for short. “We have set ourselves the goal of becoming the largest German bank in this segment,” announces Hakan Strängh, head of JP Morgan’s private bank in Germany, in an interview with the Handelsblatt. With their German private bank, the Americans concentrate on customers who have liquid assets of at least 100 million euros.
The growth strategy means that the size of the private bank will have to double in the next five to six years, which corresponds approximately to an average annual growth in assets under management and revenues of around 20 percent, explains Strängh. The ranking of the specialist magazine “Euromoney” currently leads JP Morgan in private banking in Germany in third place behind UBS and Deutsche Bank. The Americans are in second place in the UHNWI business, and UBS is also the leader in this segment.
Strängh is relying on organic growth in its expansion course: “That is the only way to achieve our goal.” The banker sees the greatest challenge in finding the right staff for the growth offensive: “We cannot compromise on quality.” Nine account managers currently work for the private bank plus four portfolio managers. Strängh expects the number of supervisors to roughly double in the next five years and the number of portfolio managers to rise to six to eight.
The private banking market in Germany is notoriously difficult. The assets managed by the providers are growing steadily, but due to the tough competition, the development of income remains weak according to the ZEB consultancy. In a country comparison, the profit margins of German private banks are sometimes significantly lower than in Austria or Switzerland – and have been falling for years. According to the ZEB data, assets under management climbed by a good 12.4 percent from 2015 to 2019, while income only grew by 1.2 percent in the same period and earnings fell by 7.4 percent.
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Strängh emphasizes that 2021 will be the best year for JP Morgan’s German private bank since 2016. The wave of IPOs and takeovers also contributes to this, flushing fresh liquidity into the coffers of entrepreneurs and major shareholders. Nevertheless, margin pressure remains high. “It is high time the industry found a bottom,” says Strängh.
The banker sees the fact that JP Morgan chose Frankfurt as a “game changer” for his area of business in continental Europe. As a result, the US bank is expected to become the third or fourth largest German bank in terms of total assets. For the banker, this is a “decisive event that will enable us to reach a new level with the private bank as well”.
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