According to VTB, as of 2018-2019 the bank private banking portfolio has increased by 62% up to 2.1 trillion rubles. As of 2019, the number of customers rose by 11% to 20 thousand people, in 2018 - by 30% (in particular, due to the merger of VTB and VTB24 customers). According to Dmitry Breytenbikher, the Head of Private Banking at VTB, the bank is planning to attract another 2.5 thousand customers this year. According to Victoria Denisova, Private Banking Department Director of Otkrytie Bank, the growth in the private banking portfolio in 2019 have amounted to 30%, up to 380 billion rubles (more than 5 thousand families); comparable indicators are expected this year. The head of L’Hermitage Wealth Management Club Dmitry Yenukov said that assets under management grew by 15%, to 174 billion rubles last year (1.7 thousand heads of families). It is planned to maintain the same dynamics in 2020.
Reduction of rates on bank deposits forces a more aggressive investment policy of affluent clients (see the reference). The representatives of private banking units interviewed by Kommersant note the growth of investment products share in customer portfolios. “The trend of fund transition of private clients in Russia is most pronounced in the private banking segment. Both industry surveys and our internal bank observations confirm that,” says Dmitry Yenukov.
According to the Head of Sberbank Private Banking Evgenia Tyurikova, three years ago the share of banking products in the portfolio structure was 70%, as of 2019 it fell to 55%.
According to Dmitry Breytenbikher, the share of investment products penetration of VTB private banking customers as of 2019 amounted to 31 it is planned to increase it to 40% this year. “I think it is a few-year trend,” he says noting that the share of investment products in the US market exceeds 80%. Alina Nazarova, the Head of the A-Club (private banking division of Alfa Bank) believes that over 40% of customers already have investment products in their portfolio and the share is growing. Victoria Denisova also noted an investment penetration increase in the total assets of clients as of 2019 from 28% to 35%. She does not expect a serious increase in 2020.
In their effort to get higher income, affluent well-off clients look not only at fixed income instruments (primarily bonds) but also stocks and structured products. Evgenia Tyurikova notes the increase in the proportion of shares in client portfolios to 36%, 16% of which are Russian: “The last two years, the Russian market has been one of the best in terms of global growth. There is no doubt, it is a riskier investment, but within a reasonable proportion of the total portfolio, customers are ready to go for it.”
Dmitry Yenukov sees the increased interest of clients in structural solutions based on stocks, as well as highly reliable bonds. According to Dmitry Breytenbikher, 3% of customers’ investment portfolio of private banking falls on structural products, 23% - stocks, the rest on various bonds, including VTB Bank’s bonds (20%). Almost all large banks (Sberbank, VTB, Gazprombank and Rosbank) show increased interest in the placement of structural bonds. Such securities are available only to qualified investors with assets of more than 6 million rubles.
With growth in number of investment instruments in portfolios, wealthy clients prefer to participate in their placement and management more actively. According to Dmitry Breytenbikher, last year the share of trust management fell from 17% to 13%, which could be explained by the popularity of financial advisory services when the client made the decision himself. According to Evgenia Tyurikova, the customers used to prefer the buy & hold strategy. Now, however, many of them rely on active management trying to get higher returns using market volatility. Alina Nazarova is confident that the focus will shift from passive investing to other approaches including active management, tactical rebalancing of assets, and the complex financial instrument use.
Photos are from open sources.