3. Onshore synergies
One of the critical differences between having and not having an onshore presence is the cost of acquiring new clients. Without an onshore presence to feed new clients with international needs, private banks have limited channels to access new assets especially in Asia where transparency is lacking and many high net worth individuals have yet to enter the global financial system. They are often left with no choice but to bid top dollars to tap into senior relationship managers’ networks.
In many cases, only a partnership is needed, which requires much less investments, as is the case with Lombard Odier and Kasikorn in Thailand or UnionBank in the Philippines. Such local players lack global capabilities but have strong domestic client bases and they would much rather make arrangements to benefit from outflows to offshore markets.
Although China has loosened ownership limits from foreign financial institutions, it is clear that strict controls on capital flows remain in a highly regulated environment.
Asset flows aside, some foreign banks have even been able to generate meaningful revenue from onshore operations. Credit Suisse, for example, has been operating in Thailand as a securities business delivering niche solutions and avoiding generic products where local price wars are too intense. Julius Baer also recently joined the list of foreign entrants into Thailand’s onshore market.
