Move necessary before setting up mainland branch

SHANGHAI - Swiss private bank Julius Baer Holdings AG opened a representative office in Shanghai, its first step onto the Chinese mainland, where the ranks of the wealthy are quickly expanding.

The office, which is not licensed to conduct private banking business in China, will act as a business liaison between the bank's head office and Chinese regulators and promote the brand in the country.

"We will further explore opportunities for the bank over the next few years as we increase our knowledge of China's wealth management market," said Sun Yan, chief representative of the Shanghai office, who moved from Credit Suisse Group to the bank in January.

The bank, founded in 1896, has traditionally focused on providing wealth management services for the rich. At the end of October, it was managing a total of 166 billion Swiss francs ($180 billion) on behalf of wealthy clients.

Under Chinese regulations, foreign banks are only allowed to run a branch after having a representative office in the country for at least two years. And Sun said the bank will probably launch a branch if it is granted a business license in two years.

The bank now provides wealth management services for Chinese clients in Singapore and Hong Kong, where it set up a representative office in 2006, turning it into a branch in 2010.

Julius Baer's China expansion comes at a time when it is cutting 150 jobs globally from a staff of 3,500 as part of a plan to save 40 million Swiss francs annually. A strong Swiss franc, which hit a record against the dollar and the euro in August, hurts Julius Bear's profits, but it also makes its foreign investments cheaper.

The Shanghai office comes after the bank's breakthrough in China this year of acquiring a QFII (qualified foreign institutional investors) license to invest in China's capital markets.

It was granted an investment quota of $100 million in September, which was oversubscribed by its foreign clients. Asia chief executive officer Thomas Meier said the bank wants to increase its quota next year, in light of its clients' strong demand.

Julius Baer sees great growth potential on the Chinese mainland, where it expects the stock of wealth of what it calls high-net-worth individuals to rise to $8.8 trillion by 2015 from $2.6 trillion in 2010.

The number of China's high-net-worth people will grow to 1.4 million by 2015 from 500,000 in 2010, accounting for more than half of the growth in Asia, according to the bank.

The number of China's yuan billionaires increased to 7,500 this year from 4,000 in 2010, according to the Hurun Research Institute, which compiles China's rich lists.

Sun said China's wealthy have a different risk appetite than their foreign counterparts.

"China's high-net-worth individuals are willing to take on more risk, though ... they have become a bit more conservative," she said.