Monaco-based CMB, the private banking group, is refreshing its brand and pushing its name forward into the European and wider wealth management space next year. This publication recently sat down with CMB's chief executive to talk about plans and potential growth.

Dramas in international financial centres, whether it be the UK’s own angst about London post-Brexit or political unrest in Hong Kong and Malta, means that some places get a chance to showcase their stability. One example is the tiny principality of Monaco.

Monaco, which has a total population upward of about 38,000, depending on various recent estimates, and a land area of 2.02 square kilometres, is the world’s most densely populated and second smallest nation, second only to the Vatican City. It makes Malta, Jersey, the Isle of Man or for that matter Hong Kong and Singapore seem large.

A lot of millionaires and those even higher on the wealth spectrum reside in a jurisdiction renowned for its annual Formula 1 motor racing antics, as well as the magic Hollywood/traditional royalty combination of the late Grace Kelly. Since the mid-19th century many a high-roller has won or lost fortunes at its green gaming tables. (Winston Churchill was, for example, a keen visitor.) As this correspondent knows, it has also been a busy hub for financial conferences. The Monaco Convention Centre actually goes underneath the sea, underlining why the principality is just made for an Ian Fleming spy caper. 

But it is the prosaic but vital role of protecting and growing clients’ wealth and wellbeing that interests the chief executive of major local banking group CMB, Francesco Grosoli, told this publication recently. (CMB stands for Compagnie Monégasque de Banque. CMB is revamping its brand and launching a new identity and marketing drive in the first quarter of 2020.)

“The market is competitive…there is a concentration of wealth that is second to none,” Grosoli told this publication at a recent meeting at its offices in the Victoria area of London. (The fact that we met there speaks to the bank’s pan-European reach.)

CMB and its parent are building out a new segment for 2020: Premier, private banking, corporate and institutionals, and external asset managers. 

Upside potential for the bank is vast. Grosoli cited data from Forbes showing that 32 per cent of Monaco’s population is made up of millionaires. By 2026 there will be 16,100 millionaires in the jurisdiction (source: Knight Frank). There is a lot of growth potential. CMB serves a significant number of existing HNW individuals. CMB has 240 employees and oversees €13.3 billion in client assets. CMB clients must have at least €1 million ($1.1 billion) to open a private bank account; to obtain full-service (investment advisory and other services), clients must have €5 million.

Competitive pressures have waxed and waned in the past decade. The number of Monaco-based banks has oscillated, contracting from about 50 banks a decade ago to 30 now, partly due to M&A, departures and other changes, although new players are entering the market, Grosoli said.

Banks such as CMB sit on a generally rising wealth escalator, even though a world of very low, or even negative, interest rates create pressures. Recent figures from PwC and UBS, for example, show that although the number of the world’s billionaires fell last year, the overall trend is up, and many of them want a non-domestic home – like Monaco.  

Structure
CMB is part of Italian banking group Mediobanca. Mediobanca has wrought a number of changes to its wealth management businesses in recent years, creating a new division bringing together CheBanca (an asset gatherer for households), CMB, Spafid and Mediobanca Private Banking. Mediobanca has also launched the new Mediobanca Asset Management product factory. CMB is able to tap into the investment banking/asset management resources of its parent, and yacht financing solutions through SelmaBipiemme Leasing, delivering the kind of service coverage clients now expect as a matter of course, Grosoli said. 

Firms such as CMB must adjust to a changing client demographic, he said. “People often used to retire here and now a much younger population lives here. They often manage their wealth and businesses from Monaco. It is also `The Mayfair of the Mediterranean Sea’”. 

“The concentration of wealth here is massive,” Grosoli continued. Monaco is a small jurisdiction and it is easy for banks and advisors to meet people, to network and get things done. 

“Historically, a lot of people here were using other markets such as Switzerland and London. That people are living permanently in Monaco they need closer partners. We have evolved from an offshore to an onshore model and countries such as the UK, Switzerland, and Monaco (what we could call `the golden triangle of wealth management’) have become even more so important wealth management centres. Because of this change of model, clients now choose their private banks because they are based in a city where they would enjoy living (environment, quality of schooling facilities, security, and political stability. Monaco ticks all these boxes,” he said. 

Challenges
Like so many other IFCs, Monaco has had its challenges, as major “onshore” nations have cracked down on what they see as unacceptable practices, a process that accelerated after the 2008 financial crash.

According to the CIA Factbook (a useful resource, as journalists know), it gave this somewhat bleak account a few years ago: “Monaco's reliance on tourism and banking for its economic growth has left it vulnerable to downturns in France and other European economies which are the principality's main trade partners. In 2009, Monaco's GDP fell by 11.5 per cent as the eurozone crisis precipitated a sharp drop in tourism and retail activity and home sales. A modest recovery ensued in 2010 and intensified in 2013, with GDP growth of more than 9 per cent, but Monaco's economic prospects remain uncertain.”

Well they seem a good deal more optimistic now. GDP surged by 6.10 per cent in 2018. On average, growth has been a solid 3.67 per cent from 2006 through to last year. Strip out the trauma of the GFC and its growth performance puts China in the shade. And the principality is getting larger, rather as Singapore has expanded its land surface by reclamation work. The new Monaco district, called Portier Cove, will add an additional 15 acres and is set to be completed in 2025.

The future
Grosoli said that as many products and services in financial services are commoditised, the task for such a private bank is to add value in how advisors help clients. That also means that technology must be developed to enhance the effectiveness of advisors.

“It is necessary to put a relationship of trust back with the client,” he said. “You need to be transparent in terms of how much you charge, why you are charging it and that you are adding value.”

Grosoli said his firm is looking to tap in to the world’s growing family offices space, which in Europe alone combines large collective asset firepower, as shown here. “A larger focus will be put on family offices and UHNW [clients]. We plan on a significant increase of the per centage of AuM,” Grosoli said.

The broad service/product lines for CMB clients are banking (cards, cheque accounts); investments (advisory, discretionary, funds); corporate banking, credit solutions (residential real estate, Lombard lending) and deal-flow access. On the latter point, Grosoli said that in 2017 Mediobanca launched a gathering of Italian families, the TEC (The Equity Club), to create opportunities for co-investment. “One of our ambitions is to create more connectivity with our shareholder”. 

One of Monaco’s key selling points is security and safety: crime is very low and the jurisdiction is stable politically. Besides its attractions of being in the Mediterranean and near Italy and France, there are excellent education and medical services, sports and culture.

“Moving to Monaco must be a life choice,” he added.