Lending tightens as numerous wealthy clients face cash flow challenges in their family businesses – a golden opportunity for smaller private banks to demonstrate entrepreneurship, sources told finews.asia.
More important than their liquid investments at banks – often worth only a slither of the overall wealth of many self-made Asian high net worth individuals who have yet to exit – the need for cash to support their businesses is direr than ever for many. In Singapore, government data revealed that company liquidation in 2019 had already soared to 287 – an all-time high since the records began – before the coronavirus outbreak even began to unleash itself.
«Larger banks have scale and balance sheet to offer cash through things like share-backed lending. But smaller banks have to be more resourceful. This is a chance to prove their often advertised entrepreneurial worth,» said an unnamed private wealth head of China at a universal bank to finews.asia.
Alternative Finance
According to the China private banker, the market for liquidity is indeed challenging but entrepreneurship could be demonstrated by seeking funds through unconventional means such as non-bank lending or financing backed by physical assets like art or wine. The nimbleness of smaller private banks is potent in the current environment, he noted, as it could enable faster approvals of external providers.
«And it’s not like you can push any [investments] right now anyways,» he added. «If your client wants to trade in this environment, he will trade. If he doesn't, he won’t. There’s literally nothing you can do about that.»
«Deals to Remember»
And more than just the additional revenue booked, another unnamed source underlined that such deals could be monumental for relationships if advisors could help secure clients’ prized family businesses.
«In Asia, we are still all about relationships and such crucial moments are the chance to deepen them,» said the source, a regional head of investment products at a pure-play private bank, highlighting the face-saving element of keeping family-owned businesses afloat.
«Don’t even worry about the short-term gains for these transactions. They will pay for themselves in the future. These are the deals to remember.»
Deleveraging at Banks
Bank and client deleveraging are concurrently at play as current markets and the future outlook remain highly volatile and uncertain. One «Reuters» report cites a loan-to-value ratio cut of 40-50 percent, from 60-70 percent, adding that liquidation of even fixed income portfolios has been difficult.
At Bank of Singapore, its chief executive Bahren Shaari recently said that clients had been reducing leverage in the last few weeks except for a «very select few» high-risk investors who were asked to bring as much collateral as possible.
