As far larger private banks and asset management firms grappled with declining profits in the wake of the first quarter's market tumble, Boston Private Financial Holdings posted gains of 82% and prepared to branch out with a new banking operation in California.
Last week the $1 billion-asset private bank applied to California regulators for a bank charter after failing to find a suitable acquisition in the Silicon Valley area to merge with its existing asset management firm there, Sand Hill Advisors.
Many of the largest U.S. banking companies, including J.P. Morgan Chase & Co. and Northern Trust Corp., have scrambled to build a private banking presence in the Silicon Valley in the last year, to attract business from young millionaire entrepreneurs. In the last two years the region has become saturated with out-of-state financial firms hoping to grab a piece of the affluent market.
The mood of the market has also changed with the steep yearlong decline in the technology sector. However, Timothy L. Vaill, chairman and chief executive officer of Boston Private Financial, seems undaunted. Though relatively late to the game in California, Boston Private - with its blend of traditional private banking, money management, and financial planning services - is positioned to find a niche, he said.
"The good news is that the economy is shaky, so we're going in with our eyes wide open," he said in an interview last week. "We're ready for a fight."
Private bankers and asset managers faced some rough weather recently. Boston Private reported assets under management at the end of the first quarter of $5.6 billion, 21% more than a year earlier but 10% less than at yearend.
Torrid deposit growth has offset declines in asset values, Mr. Vaill said. Over the last year the company's deposits have increased 50%, to $725 million at the end of the first quarter.
Some of the growth has come from customers selling equities and stockpiling the cash, Mr. Vaill said. The rest has come from the efforts of four full-time salesmen, whose mission is to gather new deposits from venture capital firms, law and consulting firms, asset management firms, and other professional groups, he said.
Financial planning services have also been a highlight, with fees rising 37%, to $1 billion. Jacqueline Reeves, an analyst at Putnam Lovell Securities, attributed the increase to demand from consumers seeking a safe haven from the volatile markets.
Boston Private will take the same approach on the West Coast, but unlike its larger competitors, it plans on using a local brand name - and a new one at that - to build its presence in the Silicon Valley. The company will be called Sand Hill Private Bank and Trust and will be run by James C. Wall, who was hired last year from Bank of Los Altos.
Mr. Wall, a former Wells Fargo & Co. executive, will team up with a jumbo mortgage production office in San Francisco that Boston Private acquired last year when Mellon Financial Corp. of Pittsburgh exited the jumbo business.
In the first quarter Boston Private increased its commercial and residential loans by 46%, to $679 million, and Mr. Vaill said there seems to be no letup in demand for jumbo mortgages - averaging $800,000 in principal.
If the Silicon Valley expansion proves successful, Boston Private may well move elsewhere, Mr. Vaill said. Right now it is looking for opportunities to expand in the Pacific Northwest, Washington, D.C., New York, the region from Austin, Tex., to Dallas, and the area stretching from northern Florida to Atlanta to North Carolina's Research Triangle, Mr. Vaill said.
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