BNP Paribas SA (BNP), France’s biggest bank, embarked on a five-year plan to expand services to affluent U.S. clients as the company looks to businesses beyond its core European market for growth.
The lender combined trust, brokerage and private-banking at its Bank of the West unit as it seeks to manage more money for wealthy people in the world’s largest economy, Sofia Merlo, co- head of wealth management at Paris-based BNP Paribas, said in an interview. The subsidiary manages about $10 billion, more than two-thirds in brokerage accounts, said John Bahnken, head of wealth management at the unit.
Wealth management has “turned into a significant positive story,” Bahnken said in an interview at the unit’s flagship office, which opened Sept. 5 in San Francisco’s financial district. “We came to the conclusion that given the client base and changing regulatory environment it was important to provide wealth management” for U.S. clients, he said.
About 70 percent of BNP Paribas’s assets at the end of 2011 were in four euro-area markets — France, Belgium, Italy and Luxembourg, based on data from its annual report. Expanding wealth management in the U.S. would lure more clients and increase revenue from a business less dependent on a region struggling with a debt crisis now in its third year.
BNP Paribas was among European banks hurt last year by a liquidity crunch, especially in U.S. dollars, and losses on Greek sovereign debt. The lender sold some U.S. corporate-and investment-banking assets to reduce its short-term funding needs in dollars. In February, the bank agreed to sell about $9.5 billion of North American energy assets to Wells Fargo & Co.
Capital Rules
Worldwide, BNP Paribas provides wealthy customers with investment advice and services related to business succession, retirement, real estate, art and philanthropy. Managing wealth provides noninterest income, entails less risk than more capital-intensive businesses and allows the lender to better meet the capital rules outlined by the Basel Committee on Banking Supervision, Bahnken said.
The company’s U.S. plans are part of a broader strategy to expand in smaller markets such as Turkey, Poland and Morocco, where it also has large retail branch networks. The Middle East, Asia and Italy also will see growth, Merlo said.
BNP Paribas’s wealth-management business had 244 billion euros ($314 billion) in assets under management in 2011 and the unit is active in 30 countries, with 6,100 employees, according to the bank’s annual report. Assets under management climbed to 258 billion euros through June, Merlo said.
Enhanced Service
“It’s very important to have this footprint in the United States,” Merlo said. In addition to U.S. customers, “many clients in Europe or Asia want to have some of their wealth in dollars,” she said.
Bank of the West has about 1.2 million clients. Customers with at least $250,000 in assets at the bank will be eligible for the enhanced service, Bahnken said. Executives will spend about 80 percent of their time telling current clients about the service and 20 percent finding new customers, he said. The bank has 55 private-client advisers, up from 25 last year, he said.
BNP Paribas took control of Bank of the West in 2001, when it purchased the 55 percent stake it didn’t own in the lender’s holding company, BancWest Corp., for about $2.4 billion. Bank of the West had $62.7 billion in assets at the end of June, according to Federal Deposit Insurance Corp. data.
Tax Havens
In Switzerland, the bank will focus on customers from Eastern Europe and the Middle East, Merlo said. Those who have kept assets in Switzerland may withdraw money and repatriate it as banks face calls from governments to identify customers who used Swiss accounts as tax havens, she said.
“Now, we see those clients will probably stay onshore,” Merlo said.
BNP doesn’t own large-scale retail-banking operations in most Asian nations. The lender will instead look to offer wealth-management services to entrepreneurs and others that have a corporate relationship with the bank, Merlo said.
BNP Paribas runs wealth-management operations in Asian markets including Hong Kong, China, Singapore and India, according to a June presentation to investors. The lender has hired about 30 wealth-management advisers in Asia since the start of the year, Merlo said.
Bloomberg
