This article is part of an Executive special report on wealth management and private banking. Read more stories as they’re published here, or pick up September’s issue at newsstands in Lebanon.
Banque Libano-Française, a Lebanese alpha group bank whose assets stood at $11 billion at the end of June 2014, does not operate a private bank and its 2007 established wealth management unit has never focused on advertising itself and its asset management services. This notwithstanding, the unit has grown its wealth management and capital markets activities, not the least via developing a fund that is registered in Luxembourg but fully managed in Beirut. Executive talked about private banking prospects and challenges with BLF treasury, capital market and wealth management global head Georges Khoury and Jamil Koudim, head of fixed income and fund specialist.
What is your competitive environment from the perspective of BLF? Are you working mainly with customers of the bank or are you competing actively for new customers?
GK Let’s face it: in Lebanon there is not a lot of private banking. The only competitors that we have are the international players, whose numbers are shrinking today. As we are talking private banking, we have a maximum of three or four [competitors] in Lebanon. Our competition is the prime bank, the big bank in Lebanon, and so far, we don’t want to differentiate ourselves from other players. What we are looking to go after is the diaspora, which exists in the GCC, in South America and some in Europe, particularly in France. Our objective is the Lebanese diaspora. No more, no less.
Cost structures of wealth management units and fees charged for private banking services have become a key issue in positioning vis-à-vis the client. What is your approach?
GK Customers are shopping around a lot because there is a lot of competition and sometimes they come with rates that we cannot afford to pay. But we have a policy in our private banking, [namely] that a customer who asks for more and more, is not fruitful for us any longer.
Asking for more?
GK I mean, they always want higher interest rates and lower debit [rates and] lower commissions. This is not what we target. The more important thing for us is that the customer [receives] very good service, a good follow up, and is smiling at the end of the day.
Does pampering the customer play a role in your approach? Do you send clients to Brazil to watch football or to England for the Premier League, or perhaps the Salzburg Festival for cultural perks?
GK I wish. My club is Man United. We would hope to have something like that. We have more as far as concerts, and the Byblos Festival. We always offered customers pampering and we used to have a very nice dinner, the semaine gastronomique where we invited the best chefs from France…
Do you still do that?
GK We stopped it two years ago; we are thinking of doing something different.
What other competitive edge do you claim for your unit when compared with other private banks?
GK The BLF Total Return Fund.
JK It is a solution for clients who want to generate a return from market movements but at the same time have money outside of Lebanon [that is] relatively safe in a non-volatile sort of investment. You can find a lot of funds that you can invest in but this is managed by us, so it is an internally run product. This complements the personalized approach of our private banking.
GK The fund is custodial in Luxembourg so your money is safe. Also it is the only fund in the Middle East that only goes international, 80 percent investment grade and 20 percent non-investment grade. We will celebrate two years in September with a close of 14 percent [net return since inception].
What is the fund’s result for 2014?
JK Year to date we are 4.6 percent up; since inception it is 13.55 percent.
What do you see as the future of private banking in Lebanon? Is there any?
GK I think if you [adhere to] the right way in your private banking, facilitate the customer [experience], help them, be transparent, follow them and deliver, it will continue. But for me globally, I think private banking is shrinking a lot.
Are we in Lebanese private banking shrinking like private banking in Switzerland?
GK No we are not like Switzerland, unless the regulations change. There are only two countries in the world now with banking secrecy: Luxemburg and Lebanon. I don’t know how much the Americans will push us to get out of that issue, but we are going to continue and banking secrecy for me is very important.
How important do you see banking secrecy for being able to do private banking?
GK For me it is number one.