Siam Commercial Bank (SCB) has joined with Swiss private banking group Julius Baer to offer global wealth management solutions to high net worth Thai investors, in line with the bank's goal of doubling the wealth management segment to 1.2 trillion baht by 2023.
It's the first time a Thai bank has dared unlock its top billionaire clients, who have assets of 100 million baht or more.
"This is the first deal in which a Thai bank has opened the door to its cream of the crop to a foreign strategic partner to accelerate growth," said president and chief executive Arthid Nanthawithaya. The deal will be Julius Baer's first inroad into the Thai market.
The partnership is one of the bank's first major moves after it instituted its upside-down strategy. For years, the size of the wealth management sector in Thailand has remained stagnant, and competitors, concerned with defining their market share, were unwilling to "share" their customers with other institutions, he said.
"There's been a fundamental shift in the way we perceive the market," said Mr Arthid. "We trust that with partnerships like this we can grow the size of the pie, not just cannibalise each other's market share."
The new corporate entity will operate in Singapore and Thailand, launching some 7-9 months from now, once it obtains licences from the Singaporean and Thai regulators. But the firm will start looking for clients as soon as May.
The contract is exclusive, meaning SCB cannot partner with other wealth management providers.
The corporate entity formed by the joint venture so far remains nameless, but Mr Arthid said the names of both companies will be in it. SCB and Julius Baer will hold 60% and 40% of the shares in the new company, respectively, which will have 1.6-1.8 billion baht in registered capital.
New staff will be hired to run the company, and both SCB and Julius Baer will have a role in electing the entity's leadership, said Bernhard Hodler, chief executive of Julius Baer Group.
The venture is intended to serve the segment covering the 30,000 Thais with assets worth 100 million baht and above. There are an additional 30,000 individuals with assets between 50-100 million baht, whose holdings total 6 trillion.
"There's close to 15 trillion baht deposited in the Thai banking system, excluding bonds and investments from asset management companies. The richest Thais own 60% of the country's wealth, which underlies the growth potential of the wealth management segment in the country," said Mr Arthid.
These high net worth investors, he said, have been using Thai banks in one way or another for the past 20 years, but were not satisfied with the local wealth management alternatives.
A number of fund managers have made inroads into the Thai market recently, but their offerings are mostly generic, said Mr Arthid. The new company, he said, will seek to fill the gap for personalised, globally focused investment portfolios.
SCB currently serves 8,000 wealth management clients, worth a combined 604 billion baht. The bank, said Mr Arthid, hopes the partnership will expand its wealth management segment to close to double its size, exceeding 1.2 trillion baht by 2023.
Mr Hodler said Mr Arthid began "the courting process" in November, soon after Mr Hodler ascended to his position. The two executives were connected through a Julius Baer officer in Singapore.
Mr Arthid described the partnership as "love at first sight", adding he'd been keeping an eye on the Swiss firm for the past three years.
"I've always known Julius Baer as one of the prettiest ladies in the industry," said the SCB chief.
Julius Baer pushed forward with the partnership, in part because the companies share similar values, said Mr Hodler. "Both SCB and Julius Baer are deeply concerned about reputation, and about creating a long-term value proposition."
Mr Hodler said the company would like to focus on the Thai market before moving on to surrounding countries also served by SCB. The deal, he said, does not necessarily represent a preference for joint ventures (as opposed to acquisitions) as its expansion method of choice in Asia.
Julius Baer operates in more than 25 countries on four continents, and managed close to US$400 billion (12.5 trillion baht) at the end of 2017, more than a quarter of which is invested in Asia. The company focuses on "pure private banking" and targets both private clients and external asset managers through its open product platform.