Private banking continues to thrive in the devastated Latin American economy.
For the few Latin Americans with vast inherited or accumulated wealth, 2020 was a very good year.
Yet private banking in the region is in a state of flux. Major international banks are abandoning some Latin American markets while ratcheting up wealth management services in others.
Regional banks, meanwhile, strive to strengthen their industry and deliver a full range of international investment vehicles. LarrainVial clients, for example, sought diversification this past year, showing particular interest in Asian emerging-nation equities, says Gonzalo Córdova, head of Wealth Management. Córdova credits fast adaptation and well-coordinated support from internal partners in compliance, risk, strategy and tech for the bank’s 2020 growth in both assets under management (AUM) and clients.
In Brazil, private banks increased their AUM 24.3% in 2020 to $312.5 billion, according to the Brazilian Association of Financial and Capital Market Entities. The sector attracted over 10,000 new clients. Low-to-zero real interest rates drove client interest beyond plain vanilla to variable income instruments, new asset securitizations, venture capital, IPOs and more. New digital independent private banking platforms willing to welcome customers with smaller fortunes were a second major driver of change.
Rogério Pessoa, co-head of Wealth Management at Brazil’s BTG Pactual, says BTG’s AUM in this segment rose 54% last year. Adding qualified lower-tier clients, the bank registered an 80% year-on-year jump in March, to $61.5 billion. BTG’s prior tech investments helped it benefit from the “frenzy” in the Brazilian private banking market, Pessoa says. “The experience of our clients today is completely different from that of three years ago,” he adds, “and in 24 months everything will be changed again.”
BTG is improving its offices in Miami and New York to better serve Latin American customers than sometimes-fickle giants. Last year, JPMorgan Chase sold its Brazil operations to Bradesco and this year abandoned Mexico, transferring those clients to BBVA. Bank of Montreal also recently abandoned Mexico. “We deal with Latin American customers like no one else,” says Pessoa. “Our main market is Latin America, where we are the major investment bank.”
In Colombia, Bancolombia drew its private bank clientele to the international—especially the US—equity markets, pushed by IMF estimates for 6.4% US economic growth in 2021. “We project major investments by our clients in the US equity market, even with the risks there,” says Juan Felipe Giraldo, president of Valores Bancolombia, which grew its total AUM by 4% last year. Giraldo observes that wealth management in Colombia has attacted foreign competitors, but the bank’s ESG funds proved attractive.
Banco Cuscatlan doubled its private bank clientele in one swoop when it acquired Scotiabank’s wealth operations in El Salvador last year,. It now serves some 1,200 wealthy individuals with $300 million in AUM—impressive in a small Central American economy where less than 1% have the $500,000 to qualify for private banking services.
Its private banking may be vaulted forward by a government effort, already underway, to build an offshore financial hub. “We hope to manage here the Central American wealth that nowadays is invested abroad,” says José Eduardo Luna, executive director of Banco Cuscatlan. He estimates implementation will take two more years, considering the needed legislative changes. “The fact that El Salvador is a dollarized economy near to the US, and an Avianca hub, favors this project,” Luna says. “[It could] bring our private banking sector the deposits of our neighbors’ richest citizens.”
One thing seems clear: Latin America’s wealthiest will continue to enjoy a wealth of options.