Australian banking group NAB focuses on beefing up its doemstic private banking and wealth management strategy, culminating in a deal with Goldman Sachs.
Each of Australia’s Big Four banks has used the global financial crisis as an opportunity for expansion and each has pursued a different objective.
In the case of NAB, the plan has been to beef up the domestic private banking and wealth management business, a strategy which has culminated this month in the bank grabbing a majority 80 per cent stake in the private client business of Melbourne-based Goldman Sachs JB Were.
Where the Commonwealth Bank and Westpac have bulked up through purchasing smaller retail banks, and ANZ has its sights set once again on Asia, NAB has judged that there is a gap in the wealth management market that is currently not being filled, either by a foreign player or by one of its main rivals.
The A$99 million Goldman acquisition follows two other significant recent moves by the bank: the A$925 million acquisition of Aviva’s life insurance and wealth management business and an internal restructure which saw the NAB’s private bank move from its previous home within business banking and across to wealth management.
The new acquisition, to be branded JBWere, will also sit as a portfolio business within the wealth division, which now has a product offering superior to any of its rivals.
NAB is Australia’s largest business banker and dominates, in particular, the market for small and medium-sized enterprises, most of which are family businesses or operated by individual entrepreneurs.
Previously, NAB’s strategy was to leverage those business banking relationships and develop them as private banking relationships as well, but now it is pursuing a more conventional wealth management model.
“It’s about putting all the pieces together for a full service offering to the high net worth segment,” said an executive from a banking rival.
“You have to say that its been done before and the major banks have a bad track record with broking, but we shall see.”
Goldman Sachs JB Were is the most recent incarnation of one of Australia’s most iconic financial services brand. JB Were has long been the brokerage of choice for Melbourne’s wealthy establishment and the deal delivers NAB an estimated 22,000 clients serviced by just over 200 advisors. This amounts to it paying A$4,500 per client for a business with A$10 billion in funds under management and A$38 billion in assets under advice.
But many in Australia have queried whether the House of Were, as it is often referred to, is as illustrious now as it has been in the past. Defections in Melbourne, Perth and Adelaide have dimmed the lustre somewhat, and while NAB chief Cameron Clyne celebrated the acquisition of “a fantastic iconic brand” there is much work to be done if the move is to be a success. Critics have also recalled the 1980s, when the major Australian banks' acquisitions of broking houses was deemed an expensive failure and speculated if this is “back to the future” for NAB.
Even so, the Were deal gives it a significant entre to a new range of high net worth individuals, while the Aviva purchase – which comes with one of Australia’s most popular wealth management and investment platforms, Navigator – gives the bank new penetration into the more mainstream wealth market.
It also delivers a life insurance operation which will make NAB Australia’s second largest provider in that space, plus strategic stakes in four independent financial planning groups.
As NAB chief Cameron Clyne said:” This acquisition will enhance our offering in key wealth management segments, adding scale, efficiency and new capabilities to our operations.”
The acquisitions are bolt-ons which play to different parts of the wealth management market, and are both established brands and businesses. Integration, on a cultural and operational basis, will be challenging to execute and there is a possibility of customer churn, particularly with the Were business.
But with none of its main rivals following the same strategy NAB probably has some time on its side, and an opportunity to build a long term advantage in wealth management in Australasia.