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Private Banking – an Overview on the Phenomenon and an Analysis of the Market Opportunities

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Private Banking – an Overview on the Phenomenon and an Analysis of the Market Opportunities Private banking – an overview on the phenomenon and an analysis of the market opportunities Laurea Magistrale in Management Engineering Ingegneria Gestionale Ordinamento 270/04, ClassE LM-31 a.a. 2019-2020 905955 SUPERVISOR DANIELE GIANCARLO ALGHISI GIUDICI POLITECNICO DI MILANO Scuola di ingegneria industriale e Dell’informazione POLITECNICO DI MILANO Master Thesis Master of Science in Management Engineering a.y. 2019/2020 Acknowledgments I want to thank my supervisor, Professor Giancarlo Giudici, for having supported me during my master thesis project. The suggestions and feedbacks he gave me were precious and useful for the outcome of the work. I want also to thank strongly Gianluca Mozzali of CFO SIM, for having provided me with a lot of material which constituted the basis for the development of my work and for all the support throughout the entire realization of my analysis. Then, I must thank my family and in particular my mum for the big help that has given to me during the more difficult phases of the work in this quarantine period. Lastly, I want to mention my friends that represent for me the pillars that have accompanied and motivated me during these years. 1 POLITECNICO DI MILANO Master Thesis Master of Science in Management Engineering a.y. 2019/2020 Private banking in Italy – an overview of the phenomenon and an analysis of the market opportunities Summary I developed my thesis upon a research proposal of CFO SIM, a stock brokerage company that deals with managed savings. The project is about an analysis that takes into consideration the amount of wealth available in the different Italian provinces and regions, with the aim of identifying the wealthiest territories and, at the same time, the ones having less coverage of private banking operators. In order to carry out the analysis, I identified two main drivers that could determine the wealth or the cash availability of an area: the individual wealth identified by per capita income as well as per capita GDP and the corporate wealth identified by their liquidity and revenues. I also identified two secondary drivers: the main foundations distributed throughout the country, as many of them are owned by wealthy entrepreneurs or by church and the number and the cash availability of the holding companies, that are those corporations that own shares in other companies. Furthermore, I searched for all the main private banking operators, both divisions of commercial banks, private banks, investment banks, stock brokerage companies and asset management companies and for each one I identified their distribution on Italian territory in terms of branches, offices or local units. I briefly reviewed the extant literature starting from presenting a general definition of the private banking concept and then I analyzed the figures of the phenomenon in the last three years (2016-2019) in Italy. Then I focused on the professional figure of the private banker and I went in deep on the relationship between private banking and the real economy. In addition, I reported some insights on the possible social value of private banking and how it can convey Private wealth to finance socially useful investments, such as the infrastructures. Finally, I made a brief overview of Italian private banking sector in the international environment, in which I reported both the weaknesses and strengths of the sector identified through the Monitor Deloitte competitiveness index. After an overview on which the wealthiest provinces were in corporate terms region by region, I globally analyzed - both per province and per region – the corporate wealth (average and overall), the individual wealth (per capita and overall) and the data related to the foundations and the holding companies. Consequently, I divided the wealth data by the number of private banking offices in order to define those territories with less potential wealth covered by the operators. Anyway, this one was not the only tool used to get the final output, because I used three different rankings with a simple scoring system aiming to determine the wealthy areas (again for both provinces and regions). For each ranking I considered the 40 best provinces with a descending score from 40 to 1 2 POLITECNICO DI MILANO Master Thesis Master of Science in Management Engineering a.y. 2019/2020 (obviously for the regions I used a descending score from 20 to 1 due to the number of Italian regions, 20). The first ranking shows all average data (average liquidity and revenues per company, per capita GDP and income and average liquidity per holding); the second ranking consists of the overall individual wealth (GDP and overall income per province or region), which I considered very significant, as provinces with a lot of individual wealth must have a much higher weight. Finally, the third one is represented by the average wealth per PB office. In this case, however, I had to eliminate the overall individual wealth (both GDP and income) because the data were not statistically valid as they were biased towards those areas that have fewer operators. In fact, all the provinces and regions that had many operators has also the poorest result and vice versa, since the income and GDP data are on average too homogeneous and similar in order to give an average result per PB office significant. For this reason, I used only the data related to company wealth (liquidity and average revenues per PB office). In each ranking I gave to each province an additional score based upon the results obtained (e.g. if a province ranks first in all the three rankings it accumulates 1 + 1 + 1 = 3 points), and, in addition to considering only the provinces that are classified in all the three rankings, in this way the provinces that obtain the lowest score are the best ones. A similar argument should be made for the regions with the only difference that, being only 20, all are classified in the three rankings and in order to determine the best ones it is enough to simply check those with the lowest final aggregate score. They represent our output, that is the provinces and regions with more wealthy not covered by private banking. The results showed us that Lombardy (in particular the capital Milan but also the provinces of Bergamo and Brescia), Lazio (in particular the capital Rome) together with Emilia Romagna (Parma, Bologna and Modena above all) are the wealthiest territories of our country. The result of Trentino Alto-Adige and in particular the province of Trento is also very interesting, because unlike the previous ones it is so wealthy, but even less covered by private banking operators, in fact there are only 20 branches in the region. Veneto (in which the province of Verona stands out), is slightly less wealthy, while Piedmont, which was expected to be quite rich, is not among the very first. I want to point out that the data regarding per capita and GDP income and the number of inhabitants per province are relative to 2016 as they are the most recent data issued by the sources. I believed that in 4 years data has not changed to such an extent that the results obtained are no more valid. As far as the companies are concerned, I want to underline that in my sample I considered those ones that have more than 10 million euros in revenues, which are the first 3,227 selected from AIDA database. Similarly, for the holding companies I considered those ones that have more than 1 million euros in terms of liquidity, which are the first 1,212 selected from AIDA database once again. 3 POLITECNICO DI MILANO Master Thesis Master of Science in Management Engineering a.y. 2019/2020 For the foundations I chose to select the most relevant ones, including many of those proposed by the italianonprofit.it site. I identified approximately 500 foundations and I believed that this number was quite substantial even if the overall number of Italian foundations is higher, also because, in any case, this driver was marginal for the final output. Finally, as regards the private banking networks, I must specify that not all operators have provided me with the territorial distribution of their branches and for this reason I was not able to obtain the data of all the institutions located in Italy, but, in any case, I selected more than 1,300 branches which I consider a rather significant sample. Key words: Private banking, PB networks distribution, corporate wealth, individual wealth, Italian provinces 4 POLITECNICO DI MILANO Master Thesis Master of Science in Management Engineering a.y. 2019/2020 Sommario Ho sviluppato la mia tesi sulla base di una richiesta di analisi di CFO SIM, una società di intermediazione mobiliare che si occupa di risparmio gestito, riguardo alla ricchezza presente in generale nelle differenti province e regioni italiane, con lo scopo di identificare quei territori in cui fosse presente maggiore ricchezza e, allo stesso tempo, che risultassero meno presidiati da operatori di private banking. Per fare ciò ho individuato due filoni principali che potessero determinare la ricchezza o la disponibilità liquida di un’area: la ricchezza individuale o familiare determinata dal reddito così come dal PIL pro capite e la ricchezza delle aziende individuata dalla liquidità e dai ricavi. Come filoni secondari ho anche individuato le principali fondazioni presenti sul territorio nazionale, in quanto molte di esse sono di proprietà di ricchi imprenditori o di ecclesiastici e ho vagliato il numero e la disponibilità liquida presente nelle holding di partecipazioni, ovvero quelle società che possiedono delle quote in altre società. Parallelamente ho fatto una ricerca di tutti i principali operatori di private banking, siano essi divisioni di banche commerciali, banche private, banche di investimento, Società di Intermediazione Mobiliare, Società di Gestione del Risparmio, e per ognuno ho individuato la loro distribuzione territoriale con filiali, uffici e unità locali.
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