EFG International's chairman tells finews.asia the bank is on the lookout for fresh talent – even at UBS. That is because the scale of the Credit Suisse integration could potentially frustrate some bankers.
Mr. Classen, do you like to ski?
I haven't been getting around to it much recently. When I was younger, I used to ski regularly. But since I married a wife who doesn't much like the mountains and the cold, that was pretty much it for me and winter sports.
But you could invite your wife to St. Moritz and Gstaad and visit the new EFG International branches located there as well.
I will almost certainly have to make the trip by myself. But I have promised the teams in St. Moritz and Gstaad that I would be visiting them in person soon.
Have you managed to make the transition to being chairman?
I believe so and feel very comfortable with this role. The work we do at the board level and with Giorgio Pradelli and management is very good.
When you started at EFG you didn't have to shake things up, unlike some of your previous jobs. The bank was already on a solid footing after years of turbulence and the merger with Ticino's BSI. Can you just let things run by themselves now?
EFG indeed made a great deal of progress in the strategy cycle ending in 2022. The financial performance was also excellent. The record profitability for the first ten months of 2023 that we disclosed in autumn shows we have also started extremely well in this new cycle.
Do you already know that 2023 will be a record year?
The only thing I can say is that we will publish our annual results on 21 February.
EFG's recruitment numbers are always closely watched when you release results as the business model is very dependent on so-called client relationship officers (CROs). In November, EFG managed to hire 130 of them, far more than you had planned to do, with a third of them coming from Credit Suisse. When it comes to hiring, was 2023 a year that only comes once in a generation?
The market for talent did experience a great deal of movement globally in 2023. It wasn't just because of what happened to the two major banks in March. We managed to hire twice as many CROs as we usually do in a normal year. UBS's takeover of Credit Suisse did open up a singular window of opportunity and our management team worked hard to get good people on board.
Your statement in May that there was maybe another month to hire Credit Suisse bankers prompted a great deal of turmoil in the sector. Is that window at the new UBS now closed?
The recruitment market is still seeing some movement and new windows are always opening up. An integration of that size and scale also has the potential to cause a certain amount of frustration. That can lead to some bankers becoming available in the market. We are always interested in new talent but I can also see that we might not hire the same number of bankers in 2024.
Why?
Our main focus is now on integrating our new advisors. At the end of the day, we are expecting that half of all new money will come from our new CROs.
What can we expect from you as chairman in 2024? What are you going to emphasize?
My main task as chairman is to set the strategic framework so that EFG can stay on its successful growth path.
«As a board member, Boris Collardi represents the Latsis family's interests»
Our key benchmark targets net new money growth of between 4 and 6 percent on our assets under management every year. We also want to keep improving our efficiency and bring the cost-income ratio down to 69 percent. Last, we want to give shareholders a return on equity of between 15 and 18 percent on an income margin of 85 basis points. We are now going about implementing those targets.
That sounds like a great deal of work. In your time as CEO, you were often recruited as a turnaround manager, with Coutts International and HSBC Switzerland coming to mind in that respect. Is there nothing that needs to be cleaned up at EFG?
Thank God that's not necessary. It is much more important to maintain the momentum here of the past few years while increasing both profit and efficiency. However, we won't rest on our laurels. There is the danger of getting complacent after a few years of success. I want to do everything to prevent that from happening.
Boris Collardi sits on EFG's board as a major shareholder and he is not particularly known for his patience. Doesn't he want the company to take much bigger steps?
I have known Boris Collardi for several years now. He has actively contributed his experience to the company as a board member and investor. He was able to help us in many ways, such as setting an expansion strategy for Asia. As a board member, Boris Collardi represents the Latsis family's interests. And those interests are long-term ones.
Collardi also presides over the regional Asia advisory board at EFG. What are the plans for the region after the bank's intense recruitment efforts there?
We saw strong organic growth in Asia last year. In Hong Kong, we managed to hire a large number of Credit Suisse employees. In Singapore, we managed to recruit many from the Bank of Singapore.
«We also offer sophisticated credit solutions»
Our main job now will be to integrate them.
You emphasize hiring but EFG also has about 400 million francs ($463 million) in its war chest that it could use for takeovers. When do you think that will happen?
Our focus is on organic growth. But we are also ready to acquire and we actively look in those markets where we already have enough weight as we see ourselves as a consolidator.
There are longstanding rumors that EGF will merge with Zurich-based private bank Julius Baer. You could do a deal now for a much cheaper price given the recent decline in the latter's shares following their involvement in the Signa debacle. Are you going to do anything?
I am aware that the rumor has been around for a long time but I am not going to comment on it.
Julius Baer's oversized involvement in Signa companies, particularly compared with other banks, raises many questions. One of them is whether a private bank of a certain size has to make its balance sheet available to high-net-worth clients as part of a holistic offering.
Credit is an integral part of any complete product palette for ultra-high-net-worth clients. The same holds for EFG as we are very focused on clients that are also private entrepreneurs. We want to offer them comprehensive services that go beyond traditional wealth management.
Do you provide structured credit in the same way that Julius Baer does?
We also offer sophisticated credit solutions. But you need very strong risk management to do that. We have a credit committee at the board level that also looks at those kinds of credits and submits them to the board depending on their importance.
«We won't make as much money in interest income this year»
In short. Those kinds of credit are part of the business but they are complementary elements that have to be subject to appropriate controls. And sized so that the balance sheet can take it.
The Signa debacle is a result of the increase in interest rates in Western economies. Money is no longer as cheap as it used to be. This year, interest rates are expected to fall. What does that mean for banks?
It is clear the interest rate business will slow. This will happen quicker than many expect. That means that we will have to make rapid adjustments. We won't make as much money in interest income this year. To compensate for that, I hope we will generate more fees in the investment and trading businesses. At the end of last year, the risk appetite of many investors increased following the decision by the Federal Reserve to keep rates at the current level while also predicting cuts for 2024. We have to wait and see if that turns out to be a long-term trend. It should help support the activities of the newly recruited advisors. Overall, I don't expect this year to be easy.
You aren't often on the ski piste anymore. But it sounds like 2024 is going to be like when you are skiing down in the fog and suddenly something pops up right in front of you.
On a fundamental level, we have to stay very close to markets and our clients. That will help us to be able to react quickly. We are very agile and we do not have any problems with making fast decisions should that be necessary.
Alexander Classen has been the chair of the board of directors at Zurich-based EFG International since the end of 2022. He has more than three decades of experience in the industry, working as the country head of HSBC Private Bank (Suisse). Before that, he was Managing Partner at Bedrock Group, a larger international multifamily office based in Geneva. Between 2011 and 2015, he was CEO of Coutts International, which was subsequently taken over by UBP. He has also worked for four years at Morgan Stanley, where he led the European private banking business. Between 2000 and 2006, he headed the Zurich office of Goldman Sachs. His first job in the industry was at Geneva-based Pictet.
