2013 a highly successful year for Bank Austria's Private Banking customers – 2014's focus will be on inheritance and lending
- Producing 8.63 per cent return, Bank Austria's asset management service significantly outperformed the industry benchmark, a ringing endorsement of Bank Austria's successful Private Banking model
- Demand for loans from high-net-worth private customers grew by 60 per cent, while low interest rates are boosting demand for property
- Over the next 30 years, the potential for the asset management business throughout Austria will amount to around EUR 510 billion in monetary assets from inheritance alone
- Customers' interest in a simple, all-inclusive advisory service fee is growing significantly
- Bank Austria has acquired more than EUR 300 million in investments as a result of organic growth from cooperation with business customers
- The management skills of the Centre of Expertise for Foundations have enabled it to safeguard jobs and the future of Austrian companies
- The markets have seen a turbulent start to the year
For the customers of Bank Austria Private Banking, 2013 was a successful year overall. In addition to delivering outstanding performance, the Private Banking division was once again able to increase both customer satisfaction and the amount of assets entrusted to it. "Bank Austria's unique Private Banking model, based on an in-depth portfolio quality analysis, the Preferred Partner concept and our VermögensManagement 5Invest asset management service, which is customised to match customers' individual appetite for risk, has again demonstrated in 2013 that it is unparalleled within the field of private banking", said Robert Zadrazil, Member of Bank Austria's Management Board. "For our customers, 2013 was a highly successful year in financial terms and that is all that counts", he continued, "because our investment strategy is geared towards preserving the purchasing power of our customers' assets."
2013: Outstanding performance and increased customer satisfaction
"Of course, our outstanding performance in the field of asset management, which in 2013 was significantly above the industry benchmark, has played a key role in ensuring that our customers are so satisfied with our service," said Robert Zadrazil. The VermögensManagement 5Invest service achieved a return of +8.63 per cent in 2013, significantly outperforming the industry benchmark of +7.14 per cent. The best investment in this portfolio was Japanese equities, which increased in value by up to 56 per cent. "Our overweighting in equities and, in particular, in Japanese stocks proved spot on", said Monika Rosen, Chief Analyst at Bank Austria Private Banking. The fact that risk has remained at a manageable level despite this excellent performance is due to the broad diversification of the investments across as many asset classes as possible. Assets under management at Bank Austria Private Banking rose by 43 per cent on the previous year to EUR 827 million. "I am particularly pleased that our advisors received top marks from our customers in areas such as advice, specialist expertise and mutual trust", explained Zadrazil, speaking about the results of the customer satisfaction survey. Satisfaction levels improved in almost every respect. In the key areas, such as advice and support, specialist expertise, commitment and personal trust, Bank Austria has a significant edge over its competitors.
Demand for loans is growing – property is an attractive investment
Wealthy people also have ideas, desires and dreams, which in many cases they need to finance with borrowed capital in order to optimise their overall earnings (for example, for tax reasons or when liquidating assets at the time of the purchase makes no financial sense). As a result, the demand for loans within Bank Austria Private Banking increased by around 60 per cent in 2013 compared with the previous year. Because of the current interest rate and capital market situation, private banking customers are increasingly opting to invest part of their capital in property (homes for their own use, properties as a pension investment, rental properties, shopping centres and retail parks, business parks, factories, etc.).
Inheritances offer huge potential for asset management services
Capital in private banking is one of the most mobile kinds in the entire banking industry. Customers are generally in the second half of their lives and expect very close support from their advisors. "With succession planning and inheritance in particular, we see huge potential in the coming years for asset management services", explained Zadrazil. Over the next thirty years, some EUR 17 billion will be inherited every year throughout Austria, purely in the form of monetary assets, which makes a total of EUR 510 billion. Around two-thirds of Austrians have no wills and 60 per cent of those that do have never updated them. This represents considerable potential for customers and banks. "We are the only private banking service provider to offer a comprehensive range of financial planning services with a team of asset management advisors in the background, individual discussions involving all the generations of a family or 'tea-time' events for discussions with experts and selected notaries in small groups, as well as a foundation service", said Zadrazil. In order to gradually convince possible successors of the value of Bank Austria's support model, potential heirs of Bank Austria's Private Banking customers are invited to make use of the bank's services without themselves being customers. "We want Bank Austria to become a platform where the next generation's interests are represented", Zadrazil explained, "because, if we do not make contact with our customers' grandchildren now, it will be very difficult for us to retain them as clients when they inherit."
Simple cost calculations – all-inclusive advice service
"During conversations with existing and potential customers, we have identified an increased interest in a simplified charging structure", said Robert Zadrazil, describing another of Bank Austria Private Banking's ideas for the future. The all-inclusive advice service will involve giving customers simple cost calculations in the form of an all-inclusive price, similar to that for asset management services. Each custody account can be tailored to meet the customer’s needs, without the costs of individual transactions having to be taken into consideration. Furthermore, this model would highlight the independent nature of the advice provided by Bank Austria, because, with no up-front commission, there would essentially be no advantage for the bank to sell its own products. Robert Zadrazil commented: "We are looking into this very closely and can envisage offering a charging model of this kind in the future."
Cooperation with business customers brings more than EUR 300 million of organic growth
The group is currently exploiting every area of potential business, and Bank Austria remains the leading bank for corporate customers in Austria. "I believe that there is still huge potential among the business customers of Bank Austria", said Zadrazil. Nine out of ten corporate customers have a business relationship with Bank Austria, with six out of ten holding their main account at the bank. Therefore, the Private Banking division has started to approach the owners and managers of these companies, together with the bank's business advisors, to inform them about Bank Austria's Private Banking services. This growth strategy from the inside outwards has already proved successful. Since 2011, the bank has acquired EUR 300 million of private banking investments as a result of this cooperation. "By exploiting these synergies, we can grow organically, without having to consider acquisitions or similar moves", Zadrazil explained.
Smart foundation management safeguards jobs and the future of companies
Austria is currently home to 3,035 foundations. As the market leader in this field, Bank Austria manages 1,159 of them, which equates to a market share of 38 per cent. Around two-thirds of all private foundations in Austria hold shares in companies, and private foundations form the backing for many large Austrian businesses. This means that thousands of jobs are directly or indirectly dependent on private foundations. For Bank Austria, foundations represent an attractive growth market. The market leader in this field has therefore brought together all of its long-term and wide-ranging experience in this area in its Centre of Expertise for Foundations. Here, Bank Austria Private Banking provides cutting-edge expertise and a top-class, comprehensive service ranging from the investment of assets and support for corporate succession planning through to the entire portfolio of services offered by a universal bank. None of Bank Austria’s competitors can offer the specialist knowledge of so many experts in a single centre of expertise.
Asset allocation strategies for 2014 – the year begins with volatile markets
This year has seen a significant increase in the volatility of the financial markets, despite the continued clear signs of a recovery for the economy as a whole. Monetary policy remains expansionary and the inflation figures are more than moderate. This points towards a continuation of the positive performance seen in the previous year, though most observers believe that the kind of rapid rally seen in 2013 will be unlikely this time around.
In particular, Monika Rosen, Chief Analyst at Bank Austria Private Banking, does not feel that the corrections in the emerging markets will lead to long-term uncertainty in the developed markets. After all, some emerging economies have already taken countermeasures in the form of interest rate rises. In addition, the economic recovery in the West should benefit the emerging markets through knock-on effects.
"We are expecting the US Federal Reserve to further taper its bond-buying", said Rosen. In this case, the returns on government bonds should continue to increase. Following the positive performance of the bond markets so far this year, the potential for further rises is thought to be limited. "Although we are well aware of the risks on the equity markets, we still prefer them to bonds", explained Rosen. Particularly in the USA, investors still have very large cash reserves; in other words, there is a large amount of money available to fuel further rises. Business performance for the fourth quarter was once again above expectations. However, the estimates for the current first quarter involve a number of uncertainties, including factors relating to the emerging markets.
Monika Rosen summed up the situation as follows: "Our overall assessment remains unchanged. We need to be increasingly vigilant with regard to the many risks, while remaining overweighted in equities. We see them as being more attractive than bonds, in particular in the light of recent bond price gains. Of course, we are monitoring the situation very closely and can reduce the risk component in our portfolio at any time."
Background information about VermögensManagement 5Invest
VermögensManagement 5Invest is a structured asset management service that is managed on a discretionary basis and offers customers five different risk profiles ranging from "conservative" to "progressive". The specialists at Bank Austria manage their customers' assets on the basis of a clearly defined and dynamically modified allocation of the various asset classes. This is determined by an in-depth market assessment by Bank Austria’s experts, based on their specialist knowledge and experience and on ongoing national and international research. Investments are currently made solely through the investment funds of our ten Preferred Partners. These Preferred Partners are analysed using a detailed due diligence process and then selected for asset management. This proven concept combines risk minimisation by means of wide-ranging diversification with global access to the ten best international fund management companies. The performance of the balanced portfolio in 2013 amounted to 8.63 per cent (cumulative performance before taxes).
Enquiries: Bank Austria Press Office Austria
Volker Moser, Tel. +43 (0) 50505 - 52854