The newly installed head of private banking in the UK for BHI, the Israeli-based bank, is relishing the challenge of building the business having recently spent a long career at UBS and Credit Suisse.
There are some private banks which have been quietly working away for so long that it comes as a surprise even to industry figures when they realise how substantial such firms can be. A case in point is Bank Hapoalim International, an Israel-based bank operating in London for almost 40 years.
The bank, which in the UK employs about 70 staff, recently appointed Paul Mann as the head of its UK private bank; Mann previously worked at UBS and Credit Suisse and has given up life in a big institution for one that carries a lower profile – at least for the time being. And while he enjoyed his career at these Swiss heavy-hitters, he is relishing the chance to work at a smaller firm without some of the political and financial issues that can buffet top-level banks.
Mann spoke to WealthBriefing at the bank’s offices in Savile Row, an area more renowned for classic English suits rather than wealth management.
“BHI has been around in London since 1972. For anyone coming in [to the bank], it is great to come into a deep, mature and surprisingly large book of business,” Mann said.
“In Switzerland, for example, it was the fastest growing bank [of its type] from 2004 to 2006. I was very struck by how substantial a bank this is,” he said.
BHI is in relatively strong financial shape: the overall group has a ratio of capital to risk-adjusted assets of 13.6 per cent, according to its second-quarter earnings release. (The parent's Tier 1 capital ratio under the Basel II rules is less, however, at 7.9 per cent). The private banking arm of the firm enjoyed a net profit of NIS67 million (around $17.7 million) in the three months to end-June, surging from NIS35 million a year before. Deposits at the entire private bank (all regions) were NIS108.4 billion, up by 1.6 per cent from the end of March.
There remains a debate in the industry on what sort of business model suits clients best – an integrated model where wealth management is part of a broader banking group or a stand-alone version. Mann is very much of the view that Bank Hapoalim’s position within a larger parent group suits clients.
“Clearly, we’re not a pure play private bank and operate as an integrated model. Hapoalim has got the largest market share [of banking in Israel] at 34 per cent in terms of the retail market.”
The bank benefits from being an Israeli bank – the country has, along with a handful of other nations, such as Canada and Australia, avoided the worst of the international financial turmoil. Hapoalim has a healthy balance sheet, he said.
And he argues that BHI is well placed in terms of its “middling” size: large enough to have the resources to give clients a good service, but without the corporate, cost and even political issues associated with a big bank. “I like this middling sweet spot,” he said.
As far as clients are concerned, ideally, they have investable wealth of between £5 million (around $7.7 million) to £20 million, he said. “I have clients with less than £5 million and some clients who are very large indeed, and we handle the latter effectively as family office.”
He points to what he sees as several strengths for the firm: its access to the Poalim Asset Management research capability at Bank Hapoalim International; the robust balance sheet of its parent, which enables it to lend in a generally unfriendly climate for credit; and the fact that as a firm, it lacks some of the associated negative baggage that can come with larger banks suffering from the credit crunch.
A lot of new clients arrive by virtue of word of mouth recommendations rather than flashy advertising, he said. “It is very viral [finding out about clients and vice versa]. In a boutique space, there’s no substitute for having clients who like you enormously and getting them to refer them to their friends. It is a boutique bank for entrepreneurs, with services from both sides of the balance sheet.”
“We can be reasonably agile and we can get involved with people at an early stage and grow with them. Entrepreneurs also attract other entrepreneurs,” he continued.
Clients fall into three broad categories: UK-based clients, Israeli clients, and diaspora clients (in places such as South Africa, etc.). “It would not be right at all to say this is a parochial business,” said Mann.
There are a number of non-Jewish clients, especially among the newer client base, he said.
This is far from being a new entrant into the wealth management field, given its heritage, but readers should not be surprised if they hear quite a lot more about BHI in the months to come. As high net worth bank customers reappraise their arrangements after several turbulent years, this is a bank that is positioning to pick up a lot of fresh business.