Private banking industry sales to shrink

By Harry Suhartono and Saeed Azhar

SINGAPORE (Reuters) - Merrill Lynch MER.N said on Wednesday it expects overall revenue of Asia's wealth management industry to fall 10-15 percent this year as global financial turmoil undermines margins.

Rahul Malhotra, Merrill's head of Asia Pacific Advisory, told the Reuters Wealth Management Summit in Singapore that while asset values have tumbled this year, the industry's asset base has been supported by Asia's still growing wealth.

"I won't say it's going to shrink dramatically. There will be erosions in terms of net asset value because markets have come off, but the fact that wealth is being generated, I don't think there will be a net decline," he said.

But he said revenue for Asian wealth management industry will fall this year, with clients reducing trading and pulling money out of higher-fee products to hold cash.

However, he said Merrill Lynch's wealth management arm will fare better than its peers in Asia because 60-70 percent of its business comes from recurring fees.

The remainder comes from transaction activity -- such as buying and selling stocks or bonds -- which could be more volatile, he said.

"We have a fairly healthy balance between annuitized assets and transactions assets... broadly you can look at 60-70 percent as fee-based," he said.

Despite the turmoil, Malhotra said the U.S. bank is keen to expand in Asia by boosting the number of relationship managers and is aiming to double assets over the next three years.

"The best place to be is in Asia, we have a good growth story in Asia," he said. "The economy may not grow 9,8,10 percent but will grow 5,6,7 pct."

The number of Merrill relationship managers and advisers in Asia outside Japan could increase by almost 40 percent to 700-750 over the next three years from 550 now, to tap growth in Taiwan, South Korea, China, India and Southeast Asia, Malhotra said.

"If we want to be the dominant player in 2012, among the top three players, we need to have presence in these onshore markets," he said, adding it wants to boost its presence in Korea and Taiwan and is looking to expand into China.

Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) agreed to buy Merrill last month as Merrill's losses from the subprime mortgage crisis mounted to more than $40 billion. The deal will give the U.S. bank the world's largest brokerage and will make it one of the globe's top investment banks.

Merrill's private banking business focuses on the rich who have at least $1 million worth of investible assets.

Malhotra said his clients have welcomed the merger that will provide the bank with a broader presence globally.

"Clients have been very positive on the BoA-Merrill merger... from our talks to clients, I think it's clearly that two fronts are getting together with the best of product sets and international presence, so I think that played out extremely well."

(Editing by Kim Coghill)