LONDON - Citigroup Inc. said it hopes to hire as many as 500 private banking specialists to advise newly wealthy Europeans.
Along with J.P. Morgan & Co., Goldman, Sachs & Co., and Merrill Lynch & Co., Citigroup is among the U.S. companies investing millions of dollars to build European private banks. Private banks advise rich people on how to invest their wealth, and the fees for such services are estimated at $6 billion a year in Europe.
The U.S. giants are challenging such European rivals as UBS AG of Switzerland to manage the $5.6 trillion of assets accrued by Europe's two million richest people. The European private banking market is forecast to grow 52%, to $8.5 trillion, by 2003, according to Merrill Lynch and Gemini Consulting Ltd.. Citigroup, which targets affluent clients through its investment banking unit, Salomon Smith Barney, said it focuses on customers who have at least $3 million to invest in the next three to four years.
"It will be difficult to find enough talent to do that because we're all trying to do the same thing," said Colin Woolcock, head of Citigroup's private banking in Europe, the Middle East, and Africa. "Most of us will be investing heavily in this business this year."
"U.S. investment banks are becoming more aggressive," said Sally Rowley-Williams, head of wealth-management recruiting at Korn/Ferry International, an executive-search firm. "There's a lot of wealth that's come out of the frothy M&A activity of the past few years, and there are more wealthy entrepreneurs as a result of floating their businesses."
J.P. Morgan this month invested $100 million to establish a pan-European private bank, consolidating existing operations in different countries. Its goal is to boost the $18 billion of assets under its management in Europe by 14% this year.
Some U.S. securities firms have shifted top executives from their investment banking divisions to spearhead private banking in Europe. On the same day J.P. Morgan announced its plans, Goldman Sachs named Sylvain Hefes, head of investment banking for France, to a new post heading its European wealth management.
Others are growing through acquisitions. Morgan Stanley Dean Witter & Co. last year bought Spain's biggest independent broker, A.B. Asesores Bursatiles Bolsa, getting a 40-branch private bank network and $4.3 billion of assets under management.
A day after J.P. Morgan and Goldman Sachs said they would step up their private banking services, Salomon Smith Barney joined the fray. It named Francois de Carbonnel, former president of GE Capital Corp.'s European operations, to build a private-client business in Europe virtually from scratch.
At the same time, Salomon and Merrill Lynch are trying to expand in the "mass affluent'' market - people with $100,000 to invest - by bringing on-line brokerage services to Europe this year. Merrill plans to start its Internet service in the United Kingdom and Spain before rolling it out to the rest of Europe. Its strategy is to establish relationships with high-net-worth people at a younger age and stick with them as their assets grow.
The time is right because of the changing profile of rich Europeans, U.S. bankers said. Earned wealth is growing faster than inherited wealth, which means the average investor is more demanding, analysts said.
"The new European investor is younger, more informed, technologically literate, risk-aware, and performance-hungry," said Christopher Humphry, a Gemini Consulting principal in London. "U.S. banks pose a challenge because their approach is more modern, more in sync with the active investor."