Vontobel CEO: «Won't Be Pushed»

Zeno Staub,CEO Vontobel

Zeno Staub,CEO Vontobel

Vontobel CEO Zeno Staub sees nothing unusual in the outflow of assets and doesn't feel under pressure to succumb to a yearning for big-buck-acquisitions. He reveals this and more he said in an interview with finews.ch.

Mr. Staub, Vontobel in the first half of 2016 has basically reached the goals it set itself for 2017. Surely it is now time to revise the medium-term estimates?

It is very nice to exceed targets. We undergo a far-reaching strategy review every third year and we won't deviate from this. Therefore there's no reason to set new targets.

The narrowing of margins in private banking and in asset management are the rather more negative aspects of the half-year results. Is this a one-time dent or do you expect the erosion to continue much as across the whole of the banking industry?

The narrowing of margins at Vontobel is down to several reasons: in asset management, it was the consequence of the changed business portfolio following the outflows into higher-yielding emerging market equity products. In multi-asset-class and fixed income, which now are more highly weighed, margins are lower for structural reasons. We tend to be less exposed to a pressure on margins than some rivals because we're fully focused on the active asset management.

«The low and negative interest rates wipe 3 to 4 basis points off the margin.»

And in wealth management?

The narrowing of margins in wealth management is in line with an industry trend. The low and negative interest rates take 3 to 4 basis points off the margin, and this cannot be changed. A further reason are the generally reluctant and risk-averse customers.

Furthermore, the changes affecting Swiss private banking have boosted the average client portfolios. This also affects the margins. The challenge is to maintain profitability faced with a lower level of margin. We've succeeded in doing this.

You've cut costs substantially in asset management. Are these recurring effects?

We expect most of them to be recurring because personnel costs declined. In the Quality Growth Boutique, the departure of Rajiv Jain led to a one-time gain of 5 million francs in the first half, which had a positive effect on the cost-income-ratio.

Asset management had an outflow of assets to the tune of 11.8 billion francs following the departure of Jain. You evidently are working hard to calm things down. The question is: will there be more asset outflows?

The outflows aren't unusual with such a departure – partly because some customers are forced to cancel their business ties due to their investment rules. The outflows have happened. For us, it was important to undertake the change of CIO at the Quality Growth Boutique in a professional manner and to communicate it a transparent way, seen both from a customer and a shareholder perspective. In other words, we presented a trustworthy successors at the same time as we announced the departure of Jain.

«We remain very optimistic about the profitability of asset management.»

Under the guidance of Matt Benkendorf, the team is stabile and all investment procedures have remained institutionalized. This is the condition for good investment results and therefore future growth. And with regard to our shareholders, we remain very optimistic about the profitability of asset management and will retain our dividend policy.

In wealth management, you are pushing organic growth in particular by hiring new relationship managers. Are you happy with the result in respect to net new money so far?

Yes, we would like to maintain our targeted growth rate of 5 percent net new money a year. To achieve continued growth of assets under management is a challenge, for two reasons: first, not every relationship manager is able to generate an unlimited amount of new money.

It wouldn't be in accordance with the requirements of the Vontobel standards of advise and service. The growth trajectory of relationship managers is forcibly getting more flat over time. Second, clients assets and profits only start growing in the 6 to 24 months after a relationship manager has been hired.

In a bid to manage continuity, you need to put the focus on existing yields and sustaining profitability, as well as on the recruitment of new talents. These have to start building their books to reach the targeted growth of 5 percent net new money. In this process, there short-term shifts occur by nature.

You've voiced your intent to grow through acquisitions in wealth management. Your competitors have meanwhile been much more active in the ongoing process of consolidation. You don't seem too worried about this?

No, we won't be pushed.

«We have very clear criteria for takeovers, which we won't alter.»

Are you evaluating potential targets on an ongoing basis?

We have very clear criteria for takeovers, which we won't alter. We owe the reputation of Vontobel to conduct any possible takeover in a spirit of partnership and fairness. We therefore aren't under pressure to become active, but remain interested.

Your capital situation is pretty strong. Chances are that shareholders will start pushing you to do something with the surplus.

It is our advantage that the main shareholder, the Vontobel family, doesn't feel that urge. It is providing us with ample liquidity, which we use for growth and which makes the bank stable.

You made your last your acquisition – Vescore – in a bid to grow your sustainability portfolio. But it is this segment which has kept costs far too high at Vescore. What will you do about the cost problem?

Vontobel has been on the topic of sustainability for years – we believe in a growing demand for such investment strategies in the medium to longer term, in particular from the public sector. Vontobel is a trustworthy provider of sustainable investments.

Our main shareholder has put 17.2 percent of the share capital in a charitable foundation. Vontobel is a very active corporate citizen: we are climate-neutral and are active in society and culturally.

The business therefore is a good fit. Raiffeisen was looking for a new owner of Vescore with a global reach, helping it achieve benefits of scale.

Our targets for Vescore remain: we want to break even by 2018 and expect integration costs of 25 million francs. The return on equity should clearly exceed 10 percent.

 

 

 

 

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