What is your assessment of the evolution of your private banking business in the first half of the year? What are your forecasts for the final stretch of the year?
The volume of business in our specialized areas of Private and Wealth Banking stood at 18,300 million in June, a growth of 17.2% compared to the same period in 2020. Our forecast is to end the year at this rate. It is in times of uncertainty that more clients approach us to inquire about our wealth advisory proposals. We have a reputation backed by solid financial and capital ratios (a CET 1 of 18.37% at the end of June, the highest in Spanish banks and one of the highest in Europe), a proven track record of prudent management and the most comprehensive value offer in advice, personalized service and ‘reporting’ proposals for private banking. This allows us to provide each client with the best option appropriate to their risk profile.
What options do savers have in this context marked by low interest rates?
Since 2018, Banca March had been pointing to a different investment landscape, which required to be analyzed in a different way than the traditional one and which required completing the proposals with innovative ideas that sought profitability in alternative sources to those of a pure cycle. The pandemic has only accelerated the speed with which markets and investors have embraced that approach. In this context, clients must seek advice, make sense of their investments and avoid ‘wonder products’. Today you cannot seek profitability without advice, without assuming a measured risk and without having a clear, proactive and well-founded investment strategy by assets, sectors, markets, geographies and term.
In addition, we live in a more complex world, more aware of the social and environmental impact of our actions, something that regulators and investors already demand of their investment managers. For example, clients invest more and more as they live, act remotely, but they also highly appreciate the personal relationship when it adds value, and incorporates quality advice and greater economic and social awareness into decision-making.
Are clients feeling more optimistic as the rate of vaccinations has intensified or is caution still prevailing?
Our Market Strategy experts believe that disease no longer directs the course of markets. The United States Stock Exchange has seen seven consecutive months of positive returns and more than a year without specific corrections exceeding 5%. Today, the degree of optimism is regulated, rather, by the attitude of central banks in the face of inflation at 20-year highs. The world economy will continue to grow apace and that, combined with negative interest rates and rising inflation, justifies remaining invested in risky assets. There may be some temporary correction, of between 5 and 10%, that should be used to reinforce the bet on equities between the sectors favored by the macro (financial or industrial) and the longer-term bets focused on the disruption (technology, health or energy transition).
Does the entity consider an inorganic growth? Is there any movement in sight?
In private banking, not everything is worth it. Providing advice in accordance with international best practices requires very high levels of solvency and a solid team of professionals. If we find firms that fit in with this philosophy and that want to join a way of doing banking similar to ours, we would be willing to consider an integration. In recent years we have carried out two relevant operations: the acquisition of the wealth advisory firm Consulnor and the purchase of BNP Paribas’ mass affluent client portfolio in Spain in 2018. We are also willing to replicate our market advisory model nearby and we explore the ways to do so.
On the occasion of the purchase of Consulnor there was an exit of managers that Banca March has denounced. At what point is the process?
As it cannot be otherwise, Banca March will continue legally to the end to defend what we understand has been an illegal act: the theft and destruction of our clients’ information and because we are convinced that it has been a clear case of competition unfair. A group departure, suddenly, in a concerted way, of all the managers who left Consulnor in 2017 to join Diaphanum cannot be described in any other way. Hugo Aramburu, who had been responsible for the Banca March Property Banking area and the Consulnor acquisition, was involved in this movement.
Sustainability has become one of the great investment trends. How do you position yourself in this area?
Already in 2018, from Banca March we identified the need to adapt the offer of advice to respond to the paradigm changes that were taking place before the pandemic in investment strategies and that, now, are becoming more relevant. In recent years we have presented innovative solutions that combine sustainability and profitability, such as the Mediterranean Fund, a fund that invests in companies linked to the water economy and that donates 10% of its management commission to non-profit organizations that promote water projects. preservation of marine ecosystems, or Next Generation, a strategy that invests in three megatrends (Revolution 4.0, Sustainability and Environment and Demography and Lifestyle). In addition, with the help of international managers we have offered clients the possibility of accessing ‘private equity’ with an energy transition approach, to sustainable and impact funds, and we have acquired, with a Co-investment vehicle, six hydroelectric plants in Portugal .
How are you responding to the challenge of digitization, accelerated by Covid?
We believe that technology will transform private banking in the coming years. Not only because of the fact that it facilitates the client’s relationship with their entity, but also because of the access to the world of private banking for younger clients and digital natives who require a different relationship with their entity. Banca March wants to be a leading player in this area. We have configured a unique business model, based on the best professionals trained in our entity, a growing use of technology, exclusive products that seek good long-term profitability and leadership in the quality of service perceived by customers. We are immersed in an ambitious digital transformation process, focused on agile and omnichannel advice and supported by tools with the best technology. We have always said that technology and digitization are at the service of our business model, being key to continue offering our quality of service. For example, in recent times we have responded to the increased demand for remote services, with the launch of new utilities, such as the new online reporting (detailed and agile information on the performance of savings and investments in real time ), the streamlining of remote product contracting, the incorporation of management tools in the cloud, encryption with blockchain or commercial and business management solutions on social networks, among others.
The private banking industry is experiencing a time of change and growing competition. What differential value does Banca March provide?
Of all the private and wealth banking entities in Spain, we are the one that best represents what global advice should be, with an exclusive and innovative value proposition, at the level of large international entities. We have developed a relationship model in which we accompany the client with global, financial and tax advice, which covers their changing needs throughout their lives. Our essence is the Joint Growth of shareholders, clients, employees and society. But it is not a mere slogan, but it is manifested in the maximum alignment of interests with clients that can be given: for more than 20 years, we have shared investments with them in real economy projects and in alternative products. This is what we call Co-investment, a unique feature that only Banca March can offer because it is the shareholders themselves who participate with the clients in the same investments. Another characteristic is that we are not subject to the short-term pressures of the markets, as is the case with listed entities, and to the solidity of our business model, of responsible and prudent management, is also added to our reputational solidity. We are never going to sacrifice solvency for short-term profitability since our client thinks in the long term. For this reason, it is at times like today that our advisory model becomes more valuable. Many clients had the experience of the past crisis, in which Banca March emerged without reputational blemish because unnecessary risks were not assumed (real estate, toxic products …).