Private banking deals with financial advice and management of money, investment and assets belonging to upper affluent, high net worth individuals (HNWI) and ultra-high net worth individuals (UHNWI). These clients may be wealthy individuals or big corporates. BNP Paribas, a Paris based bank with a successful private banking arm has been voted as seventh best private bank in global ranking. It continues to savour business success as the number one private bank in Eurozone. This laudable success is traced back to the business model that the bank has rolled out in many countries.
BNP Paribas Private Banking is one of the largest in the continent with a portfolio of Euro 255 billion in client assets spread in about 30 countries. France alone accounts for nearly 40 % of its client assets which is closely followed by a whopping 35 % in Europe - Off-shore- Middle –East and Latin America segment. Asia comes third with a 12% share.
Business Model
BNP Paribas has introduced an effective business model interwoven with four core concepts: value proposition, segmentation, leverage and synergy.
1. Value Proposition
Understanding the asset & liability base of client is the first limb in value proposition that takes it to next logical step of clarifying what the client expects or requires from the bank. Third step is to determine jointly with the client an appropriate long-term asset allocation model as well as a suitable investment holding structure. Once it is done, the agreed upon strategy is put through the works. To do that business model dictates the selection of the right products and securities. Regular review of the investment portfolio is the final limb that seeks to adjust the portfolio in terms of market evolution and changing client needs
2. Segmentation
Bringing in a remarkable focus and approach on client segmentation BNP Paribas has identified three client groups who are described as upper affluent, high net worth individuals (HNWI) and ultra-high net worth individuals (UHNWI). Each segmented group is serviced by strategy fine-tuned as per their predilection and personal needs. For example, in the HNWI segment, the focus is on net new assets together with general return on existing client assets. Whereas UHNWI gets further tweaked focus and approach; in their case absolute return is accompanied with attention on net new assets. Moreover, each segment is afforded with different commercial approaches. Upper affluent gets standardised ones that are in store, while the UHNWI is showered with tailor made innovative solutions
3. Leverage
Two mutually exclusive sub-models are displayed under leverage. A stand-alone model is employed in regions such as China, India, South East Asia and Latin America while a joint service model with inputs from sister entities within the BNP Paribas umbrella such as Corporate Investment Bank is offered to clients in Middle-East and Hong Kong segment. This serves two goals: one is that it leverages specialised services of different arms of BNP Paribas group in product delivery; the other is that this leads to corporate synergy within the group resources
4. Synergy
Harnessing significant synergies within BNP Paribas group resources is a key objective enmeshing well with the concept of leverage stated above. Corporate & Investment Banking and Asset Management & Services are two specialised entities that are identified in the business model as generators of synergy in terms of product offering and operationalization of customer mandates in private banking. Corporate finance, export project, structured finance and cash management from Corporate & Investment Banking arm along with asset management, Insurance and real estate services from Asset Management & Services division are pinpointed to contribute towards group synergy. Ostensibly, the linking pins between these two arms continue to be the concepts of client referrals, cross selling and platform sharing that exist and perhaps encouraged by the business model.
So the success story of BNP Paribas Private Banking continues. Would other private bankers take not?
Muthu Ashraff
Business Adviser
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E-mail : cosmicgems@gmail.com
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