The banking industry has begun putting greater emphasis on private banking as it seeks to increase profitability and eradicate huge loan-loss charges.
Private banking services include advising corporate owners and the wealthy on asset management, maximizing cash flows from real estate holdings, passing on founders’ businesses to heirs, and mergers and acquisitions.
Major banks are marshaling their personnel and financial resources for private banking because in recent years the more promising the outlook of a company has been, the more tenuous its transactions with a bank have become.
Companies with high growth potential find it easy to raise funds from the stock market through such means as initial public offerings.
Banks, however, are haunted by concerns that many of their loan-hungry corporate customers could become old-economy companies swamped by bad loans, undercutting the banks’ own prospects for growth.
Banks, by putting greater emphasis on private banking, appear intent on building up business relationships with the owners of companies active in promising business fields, with an eye to winning the firms’ business in the future.
Sumitomo Mitsui Banking Corp. is limiting its focus to “the owners of companies with high growth potential,” a SMBC official said.
The core bank of Sumitomo Mitsui Financial Group Inc. has appointed 30 veteran bankers with experience of posts such as branch chief to offer one-on-one private banking services involving long relationships with single clients.
“Our clients have sought advice on matters related to business activities of the companies they are managing more often than on management of the assets they own as individuals,” the SMBC official said.
Such inquiries from their clients have led SMBC’s private bankers to seek assistance from other Sumitomo Group companies engaged in such fields as real estate, trust banking and the securities business.
SMBC private bankers are willing to provide advice even at midnight, early in the morning and on holidays by honoring the schedules of their busy clients.
Private bankers “lead a life that is very different from public perceptions of the life of an ordinary banker,” the official said.
Bank of Tokyo-Mitsubishi set up a company specializing in private banking by teaming up with such allies as Mitsubishi Estate Co., Tokio Marine & Fire Insurance Co., the core firm of Millea Holdings Inc., and regional banks.
Mizuho Bank, one of the two core banks of Mizuho Holdings Inc., has created an “area private banker” post at key bank branches throughout the nation.
These private bankers are providing private banking services to successful local entrepreneurs in close contact with professionals at Mizuho’s Tokyo headquarters.
Such cooperation has become necessary because the wealthy in local areas have come to seek a wide range of services beyond those available at local branches.
Regional banks themselves are stepping up efforts to diversify and enhance their private banking services by pushing cooperation with major banks with which they have close ties.
A banking analyst at a major brokerage house said, “The founders of companies whose firms prospered and expanded sharply during the years of high growth rates in Japan’s gross domestic product (in the 1960s) are now advanced in age.
“The frequency of inquiries from these people to private bankers concerning the issue of handing over the ownership of their companies to heirs has recently increased nationwide,” the analyst said.
Citibank of the U.S. introduced private banking to the Japanese market.
At present, the bank’s Japan unit has a team of 120 private bankers, whose operations are complemented by a support staff of nearly 300.
Bank of Japan statistics show that Japan has only 500 bank accounts in which individual depositors keep 1 billion yen or more.
Kenji Nishida, a senior official in charge of private banking at Citibank, said, “Customers at our private banking division sometimes invest money in units of 1 billion yen to 10 billion yen, so a customer corresponds with a midsize company.”
Citibank organized a two-week, seminar-cum-social gathering this summer in New York for young heirs of the owners of companies from various countries to help them build global connections.
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