As Europe’s financial landscape evolves, Luxembourg-based Intesa Sanpaolo Wealth Management S.A., known locally as ISPWM, is positioning itself to lead the charge into a new era of digital private banking.
CEO Marc Flammang and Belgian branch director Xavier Rubbens recently spoke to Investment Officer Luxembourg and provided insight into clients’ growing appetite for digital investing and the bank’s outlook heading into 2025.
Turin-headquartered Intesa Sanpaolo, Italy’s first banking group and the parent of ISPWM, last month announced an agreement with the world’s largest asset manager, BlackRock, to develop its digital wealth management initiative in Luxembourg and Belgium.
The European mass affluent private banking market is “estimated at 8,000 billion of assets and, within this market, more or less 30 percent of people are digital only,” Marc Flammang, CEO of ISPW said. “We want to tackle this market.”
Flammang anticipates coming to the market with savings plans with goal-based investment and that clients will have the possibility, via digital means (i.e., video conferencing), to discuss their portfolios with their investment advisors. A similar “user-friendly” initiative was previously launched in the group in Italy under the name Fideuram Direct, and similar capabilities will be part of the initiative to Belux clientele in 2025.
Mix of tradition and innovation
As part of its ambitious three-year plan for the 2022-2025 period, Intesa Sanpaolo committed to investing five billion euro in digitalisation and AI. The bank said it has identified some 800 digitalisation and AI projects. The large majority of these projects have been either launched or completely implemented already, according to Flammang. “We are convinced that traditional banking will change dramatically over the next 10 years,” he added. “I think you have to be a leader in this change.”
And, while AI will undoubtedly make internal processes more efficient, Flammang also believes the extra value-add could be in tighter fine-tuning of the tailor-made solutions required in private banking. Customization is key, even across Belux, where there are notable differences of investment styles. As Belgian branch director Xavier Rubbens noted, Belgian clients are quite oriented to direct investment and funds; Luxembourg clients tend to be more cash-driven.
At the start of 2024, Flammang said, term deposits were interesting in comparison to the risk taken, but clients “profited from the stock market this year, and I think that was a general tendency, especially accelerated when the Central Bank started to cut rates in Europe over the summer.”
With the rates coming down, furthermore, he believes more are convinced that it’s important to be present in the market than to be focused just on cash, and that this is especially true for the younger generation. ISPWM is aiming to provide a mix of traditional and innovative investment solutions to address these needs.
Opportunities, risks for 2025
Both Flammang and Rubbens addressed certain political risks in the year ahead. Flammang, for instance, referred to the possibility of being “stuck in a political non-decision environment for at least the first half of the year,” as French and German governments shape up, plus investors waiting to see whether newly elected Donald Trump will indeed orient towards a much more U.S.-focused agenda.
While Flammang said inflation is no longer a “major concern in Europe,” in the U.S., it’s anticipated to be around 2 percent, depending on the oil price. “Meanwhile, in the U.S., the policy that Mr. Trump announced at least that he will do is fuel inflation,” he added, “and so it will be interesting to see if the Federal Reserve will be able to lower the interest rates as anticipated by the markets right now.”
Rubbens also addressed the Asian market, questioning whether “China will remain the China it is today”, citing both Xi Jinping being awarded his third five-year mandate in 2023 and the impact China has on other countries, particularly those in its vicinity.
More volatility expected
Overall, Flammang anticipates 2025 as a year that will be marked with more volatility but one with the potential to create “huge opportunities”, e.g., a possible shift “from only tech-driven rallies to a broader performance in small- and mid-sized companies.”
Intesa Sanpaolo’s international footprint includes over 900 branches in 12 countries, focusing on commercial banking, and international hubs based in Luxembourg and Switzerland to serve HNWI and UHNWI clients. Its international network supports corporate clients across 24 countries.
About ISPWM
Intesa Sanpaolo Wealth Management S.A. (ISPWM), headquartered in Luxembourg, specialises in private banking for high-net-worth clients. Formerly known as Compagnie de Banque Privée Quilvest S.A., it joined the Intesa Sanpaolo Group in June 2022. The absorption of Fideuram Bank Luxembourg on 1 January 2023 doubled ISPWM’s balance sheet and expanded its client base.
As of 31 December 2023, ISPWM reported total assets of 3.5 billion euro, liabilities of 3.2 billion euro, and shareholders’ equity of 248.5 million euro, according to its 2023 annual report. Net profit reached 12.3 million euro, up from 8.5 million euro in 2022, driven by higher interest rates that boosted interest income to 109.8 million euro, compared to 17.7 million euro the previous year. Fees and commission income also rose to 58 million euro, up from 40 million euro.
The merger with Fideuram Bank Luxembourg brought efficiencies, increasing the headcount to 216 employees (200 in Luxembourg and 16 in Belgium). ISPWM’s capital adequacy ratio stood at 49.1 percent, well above regulatory requirements. The Liquidity Coverage Ratio (LCR) was 154.1 percent, and the Net Stable Funding Ratio (NSFR) was 219.5 pecent, reflecting solid balance sheet management.