EXCLUSIVE INTERVIEW: Rejuvenating A Classic Business At Kleinwort Benson

Tom Burroughes

25 July 2012

When a private bank with a venerable name is sold by an embattled German parent at the orders of the European Union, it might not seem at the time like a blessing in disguise. But as far as Kleinwort Benson is concerned, its parting of the ways from Commerzbank looks like a stroke of good fortune.

Kleinwort Benson is one of the “golden oldies” of the City: a firm with a history dating way back before the Big Bang upheavals in the mid-1980s. (In fact, its history goes back to 1786, before the French Revolution.) Like some of its peers, however, it was snaffled up by big banks looking for assets. But Commerzbank, laden with bad loans stemming from the credit crunch, had to let Kleinwort Benson go, which it duly did in October 2009, for £225 million (around $350 million) in cash to Belgium's RHJ International, a listed diversified holding company.

The bank is in seemingly fine fettle: Kleinwort Benson has a core Tier 1 capital ratio of 21 per cent, well over the Basel III stipulated level and even greater than the more onerous Swiss capital requirements. It has a loan-to-deposit ratio of 26 per cent, one of the lowest in Europe.

And the chief executive of Kleinwort Benson, Sally Tennant, seems very pleased with how Kleinwort Benson is now set up, and looked to be enjoying life at the helm after her move from Lombard Odier, joining at the start of 2011. She recently discussed her strategy with WealthBriefing at her offices in central London.

“It had been a bit neglected – it was and is a fabulous business that needed to be invested in. Our purpose is to help clients create, conserve and enhance their wealth. Our differentiator is the creating bit,” Tennant said.

“The approach was very much to build a bank geared to having a business model around the client, starting with a relatively clean sheet of paper,” she continued.

A rejuvenated classic

Tennant likened the previous position at Kleinwort Benson, a venerable UK financial institution, to that of Jaguar, the old British luxury carmaker that had seen its fortunes wane in the 1970s and 80s but which has recently regained its reputation for style and quality under the current ownership of Tata.

“We are owned by a publicly-listed company, but not part of commercial or investment bank. Being independent, and not having these conflicts of interest, helps rebuild trust,” she said. “We don’t run a capital book and don’t try and compete with our own clients.”

Credit and corporate advisory functions are right at the centre of what the bank does for its wealth management clients, she said. “It is all about helping clients – do they need debt, or equity. We look at upcoming liquidity events, or if they need to find a co-investor. Our approach resonates with a lot of entrepreneurial clients,” she said. In some respects, she wants to remind people of the virtues of old-fashioned, advisory-driven merchant banking as well as high-quality wealth management.

And the remuneration of staff - not based on some short-term target - is also key, she said. “We have skin in the game – we invest alongside our clients and we are not making money out of them but with them,” Tennant said.

Changes, acquisitions

Since Tennant took up the CEO slot, there have been plenty of changes. For example, Kleinwort Benson bought Close Brothers’ offshore business (Close Offshore Group) last June. The purchase brought in £600 million of deposits, giving the firm the ability to lend more. One of the benefits of buying this Close business was bringing in its Temenos T24 banking platform, which meant that Kleinwort Benson – which was looking to up-rate its technology – did not have to start from scratch, she said.

“It area before I came here,” she said.

“We look at this area more like a professional services firm. We have been relatively low-key about it and are building it up. We are working with family offices, who may want an outsourced solution for some services, and not trying to compete with them.”

Results and future

Results for 2011 showed that the business has moved from making a loss to a profit, she said. “We have done that and continued to invest in the business.”

What will the firm be like in a few years’ time?

“It will have grown in terms of private investment office and private wealth offering, and gained market share. The success will also be measured by the fact that our clients will rely on, and use, our corporate advisory team,” said Tennant.

A few weeks ago, a report in the Financial Times said that RHJ was under shareholder pressure to sell assets. But in the light of what Tennant has said, and given RHJ’s own positioning away from industrial sectors and towards financials, it seems hard to fathom why it would want to let Kleinwort Benson go, particularly given its own hires and acquisitions of recent months. The financial world remains uncertain, but there can be little doubt that Tennant and her new colleagues seem very determined to keep the name of Kleinwort Benson firmly on the wealth management map.