This interview is with Venetia Lean, chief operating officer at Banque Havilland, a bank that has metamorphosed from the stricken Icelandic bank, Kaupthing. This publication recently interviewed Lean to ask about a very “family bank”.

Editor’s note: This interview is with Venetia Lean, chief operating officer at Banque Havilland, a Luxembourg-based bank that has metamorphosed from the stricken Icelandic bank Kaupthing. This publication recently interviewed Lean at the firm's London office in Savile Row to ask about a very “family bank” that has been in the news recently with expansion moves. (To view the most recent story, click here.)

Please explain how Banque Havilland started. How did it get is current name?

The Rowland Family has over 50 years of experience in the finance and investment sector driven initially through the career of David Rowland.  As the years progressed and the family has grown up the decision was taken to formalise this finance and investment expertise. The first incarnation of this was Blackfish Capital Management (“Blackfish”), an FSA-regulated investment management firm established by the family in 2006. Blackfish is the investment manager for several Cayman-domiciled investment funds, which were established to follow investment strategies that the family has employed over the years. Blackfish also operated a number of managed accounts for several individuals from the family network.

The idea to establish a bank emerged from the family’s desire to create a private bank that we would like to bank with. My father has always believed there is a need for a traditional private bank where clients can be confident their assets are safe, particularly following the recent global financial crisis in 2008 where he was deeply concerned about the assets he has with many of the large banks. Initially we looked into applying for a bank licence in Switzerland but this is a long, complex and expensive process, and when the opportunity arose to acquire the banking licence, infrastructure and assets of the former Kaupthing Bank Luxembourg, we took this option. Banque Havilland SA (the “Bank”) was established in July 2009.

The family’s idea is to build a strong new private bank providing safety and reliability for those looking for a new partner to help them secure and manage their wealth.  In essence we aim for our clients to have the security of a sound and independent bank, complemented by access to the experience and wider family network and a range of investment opportunities. The name originates from my father’s house in Guernsey, Havilland Hall.

This is very much a family-run bank. Who are the family members and what do they do and in which areas?

My father David Rowland is the honorary president, and is not involved in the day to day operation of the bank. Of his eight children, seven work within the bank.

My brother Jonathan Rowland and I are directors of the bank. Jonathan is also the CEO of the Monaco subsidiary and I am COO of the Luxembourg Bank. Jean-Francois Willems is the CEO of Luxembourg and is not a family member. He brings a balance and banking expertise to the management team of the bank.

Our brother Harley Rowland works in Asset Management in Luxembourg. There are four other younger brothers who hold junior positions in the treasury, IT and private banking departments across the different locations. It’s important that everyone learns how the bank works from the bottom up. Family members have varying roles within the bank ensuring our values are embedded into the culture.

What is distinctive about this bank?

There are several aspects of the offer that differentiate us from our peers. The most important is the family ownership of the bank as it brings so many different benefits. Firstly the independence of being privately-owned means we are not impacted by those issues that affect the larger banking groups and we are able to move more quickly to adapt to changes in the market environment.

The family offers clients insights into the way it manages its own wealth. In fact, treating clients’ money as carefully as it were managing its own is key to the Rowland approach. The French have a legal expression for it: “Gestion en bon père de famille” – or the prudent management of the head of the family. Clients can meet with members of the family or have access to the network of the family depending on their investment/business needs. We recognise this and with less than three years under our belt as owners and managers of a private bank, Banque Havilland’s credibility as an institution is synonymous with the family’s track record of building its own wealth. For certain clients there is also the opportunity to become part of an investment club and be given the opportunity to co-invest with the family.

Finally the strength and simplicity of our balance sheet is distinctive in the banking sector today, coupled with liquidity and solvency ratios that are way above the regulatory minimum we provide those who are looking for a safe haven for their assets, an attractive proposition.

The market is already pretty crowded - how are you aiming to succeed in this environment?

We think that the family ownership gives us a strong and unique differentiator that will make us stand out in this market. We are not trying to replace a primary banking relationship that a client might have but we think we would become one in a portfolio. Our aim is to provide clients with a very high quality private banking service coupled with unique investment opportunities.

How will the experience of buying the old Kaupthing operation, dealing with some of those legacy issues and rebuilding shape how the bank operates going forward?

The first two years of the bank’s life have been focused on stabilising the infrastructure, managing the cost base and reducing the balance sheet. We have been very inward-orientated with the aim of ensuring that the problems created by the former bank are managed and removed from our operation. This experience has meant that we have been through every part of the bank with a fine-tooth comb and we know exactly what we have and what we need to build for the future.

As stated earlier the bank will operate in a very conservative manner with the emphasis on wealth preservation. The internal operations are and have been redesigned to follow this strategy. For example we have strengthened our Internal Control Unit and the initiatives driven by this team have been praised by the local regulator in a recent review that they conducted.

Do you have specific targets or time-frames for measuring success?

Our most important goal this year is to have the UK branch up and running in time for 1st January 2013 which involves seeking the approval of both the Luxembourg and UK regulators,  hiring of a team of private bankers and asset management staff as well as setting up the operational side. There is a business plan attached to this initiative which we see driving our growth in terms of assets and new clients over the next 3 – 5 years. We are pleased with our performance this year in terms of the assets coming in (about €50 million) driven by word of mouth and very little marketing activity.

Size?

We currently have circa €500 million in assets under management. This has been stable since the bank opened in July 2009.

You said family members co-invest - how does this work? You mentioned the idea of an investment club. Can you elaborate on that?

Yes, alongside the traditional private banking services, selected clients with the corresponding risk appetite are invited to "co-invest" with the bank’s shareholder, the Rowland family. The current economic environment opens up investment opportunities in a variety of business sectors and geographies that are unique and often not readily accessible to the public, but are presented to the family on a regular basis.

These opportunities can range from private equity style investments such as stakes in start-up companies, pre-IPO support or distressed situations through to other capital markets or lending products. It is important to note that only carefully selected opportunities that have passed the family’s investment vetting process and that the family itself invests in would be presented to clients for co-investment.

In the past the Rowland family’s investments have taken the form of both direct and indirect stakes in businesses, either on our own behalf or in conjunction with select partners. Sharing these opportunities with the bank’s clients fosters a "club" approach; access to a network of successful entrepreneurs and business leaders, in turn leading to greater scope for off-market investment in interesting situations.

Where are your offices?

These are Luxembourg (head office with full banking licence), Monaco (subsidiary with full banking licence) and London (representative office but in process of applying for branch licence).

How do you generally view the wealth management market at the moment?

A real opportunity for a privately owned, conservatively operated banks such as Banque Havilland. A very fragmented market exists with varied service quality and advice. The universal banks have disappointed their clients during the financial crisis and as a result these families and individuals are actively looking for alternatives – banks like Banque Havilland that place the client first, understand wealth management and at the same time provide a safe haven for their deposits are winning business.

How are you faring in terms of margins, ability to hire talented people, costs, regulatory issues?

As far as margins are concerned not much has changed in the sense that we have been maintaining the client base we inherited in 2009. We will be subject to the same macro pressures as other private banks with regard to certain products and services. Our aim will however be to operate at a premium level as we are offering an exceptional and unique service.

In terms of people we have recently hired a very senior private banker from London who is our CEO, Private Banking. Nicholas Parker has recently joined from Citi Private Bank where he was managing director and he will be tasked with developing Banque Havilland’s private banking offering. His recruitment marks the first in a series of appointments focusing on building Banque Havilland’s team in London, Luxembourg and Monaco who will be targeting an international client base in the mould of the founding family. The fact that we have been able to hire someone of Nick’s calibre means a lot to the bank especially after a difficult couple of years. It means that he recognises the potential of what we have in the bank today – in terms of the infrastructure and the overall offer.

Following Nick’s appointment we are in the process of building a team of some of the best private banking and asset management professionals in the UK.

In addition to this we are in the process of applying for a UK banking licence. We hope to be up and running by 1st January 2013.

Since inception the bank has been very sensitive to costs and we have had a strict cost management approach. This is evidenced through the downsizing of the staff base in Luxembourg from around 150 to 50 people today which was the biggest cost for the bank. There are been other measures taken alongside this over the last couple of years. Going forward we recognise that in order to achieve our long term goals we need to invest in the future hence the development of the UK team, but we are always looking for ways to maximise operational efficiency and the cost base is something we actively manage on a daily basis.

In terms of regulation, we see a lot of it coming our way but having spent the last couple of years strengthening our risk and compliance operations we feel well positioned to deal with these challenges. In our sector it’s a fact of life so we are proactive in dealing with the new regulations.

Are you seeing signs of people moving money as a result of fears about the eurozone/other issues?

No not from Banque Havilland as we operate across jurisdictions, offer multi-currency solutions and are lucky to have a sophisticated and knowledgeable client base. All of this is done within a bank with a strong liquid balance sheet.

Where would you like this bank to be in a decade from now?

We hope sooner than a decade, but we intend to be the natural bank of choice for a sophisticated and wealthy client base. Our expansion into natural markets (Monaco/UK) is already under way and generating results, meaning that we are confident that we will have also created a family legacy to be proud of.