Wealth Management in Hungary 2009

Introduction

The wealth management market in Hungary is becoming much more competitive, spurred on by the growth of domestic providers. Hungarian high net worths, however, remain unsophisticated and staunchly conservative when it comes to investments. To succeed in the country, wealth managers need to know what this lucrative customer wants from them, in terms of products, services and interactions.

Scope

*Sizes, segments and forecasts the number of affluent individuals across 10 liquid asset bands from EUR50k.

*Primary research among domestic wealth managers provides insight into HNWs and the private banking market.

*Utilizes Datamonitor's proprietary Wealth Management Opportunity Index to score the attractiveness of the market.

Highlights

The steady growth that characterized the Hungarian economy has given way to a rather poor performance and the country faces a difficult path back to stability. In spite of this, Datamonitor's figures show that the number of Hungarian affluents actually grew in 2008, thanks in good part to a preference for more conservative investment products.

Hungarian HNWs are relatively unsophisticated and conservative when it comes to their wealth, although their rather simple portfolio allocations are swayed by high interest rates. Wealth managers need to cater for this by offering them: personal service; low risk, understandable products; and customized education in investment matters

The competitive landscape of the Hungarian wealth management market has seen important changes over the last decade, with a number of international wealth managers gaining a presence in the market. However, it is the domestic bank, OTP, which occupies the number one spot in Hungary's wealth management landscape. This report profiles OTP.

Reasons to Purchase

*Understand the opportunities for foreign wealth managers in this market through business success insights from the major players.

*Assess market attractiveness by reviewing size and growth forecasts for the potential wealthy client base five years ahead.

*See how the Hungarian wealth management market scores against Datamonitor's Opportunity Index.

Report Highlights
Highlights

The steady growth that characterized the Hungarian economy has given way to a rather poor performance and the country faces a difficult path back to stability. In spite of this, Datamonitor's figures show that the number of Hungarian affluents actually grew in 2008, thanks in good part to a preference for more conservative investment products.

Hungarian HNWs are relatively unsophisticated and conservative when it comes to their wealth, although their rather simple portfolio allocations are swayed by high interest rates. Wealth managers need to cater for this by offering them: personal service; low risk, understandable products; and customized education in investment matters

The competitive landscape of the Hungarian wealth management market has seen important changes over the last decade, with a number of international wealth managers gaining a presence in the market. However, it is the domestic bank, OTP, which occupies the number one spot in Hungary's wealth management landscape. This report profiles OTP.
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Table of Contents 4
Table of tables 6
Table of figures 7
HUNGARY'S WEALTH 8
Hungary is a nation deep in recession 8
Prior to the recession, the country was borrowing excessively, exacerbating Hungary's vulnerability 8
Hungary faces a difficult path back to economic stability 8
Structural reforms are required to aid recovery 9
Hungary has experienced mixed economic performance over the past five years 9
The Budapest stock market has performed relatively poorly over the past five years 11
Higher interest and money market rates have helped Hungarian investors in the last couple of years 13
Hungarian investors like to play it safe with their money 14
Deposits dominate the portfolios of Hungarian investors 14
Despite the recessionary environment, the value of Hungarian HNWs' assets increased in 2008 16
There was a small increase in the number of affluents and the value of their assets despite the economic and financial upheaval 16
HUNGARY'S WEALTH MANAGEMENT MARKET 20
The Hungarian wealth management market is developing and providers need to focus on improving their offering 20
The Wealth Management Opportunity Index 20
Wealth management market features 23
Range of products and services: 2 23
Level of consolidation: -2 23
Ease of market entry: 0 24
Level of international wealth management activity in the country: -2 25
Level of use of onshore services: 3 26
Level of demand for high quality service: -2 26
Case study: OTP Bank's wealth management offering has grown phenomenally well but faces real difficulties in the current economic environment 27
OTP wealth management commenced operating in the late 1990s 27
OTP has greatly increased its client base and assets under management since it restructured in 2002 27
The bank's wealth management offering is built around two customer segments 28
OTP wealth management has experienced tremendous product development on an open architecture platform 28
Offshore services are not currently a feature of OTP's wealth management service offering 29
A developing market under real economic pressure makes the work of a wealth manager very difficult 29
OTP is not waiting for recovery before launching a client education program 29
Appendix 30
Datamonitor's Wealth Management Opportunity Index 30
There are five key parameters when assessing a market for its wealth management potential 30
There are 18 components to the five key parameters of the wealth management opportunity index 31
Institutional factors 31
Economic variables 31
Wealth management market size 31
Wealth management market features 32
Wealth management client characteristics 33
Definitions 34
The drivers of growth in the wealthy population 34
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 34
Investment returns (market capitalization, interest rates and bond yields) 34
The following measures are not, in themselves, drivers of wealthy population growth 34
Market capitalization 34
GDP 34
The following measures are not drivers of wealthy population growth except under very restricted circumstances 35
Primary residence value growth 35
Inheritance 35
Methodology 35
Global Wealth Model 35
The UK sub model 35
Global sub model (for all other countries) 35
Forecasting methodology 36
Continuous refinement to the understanding of liquid wealth distribution 36
Datamonitor's wealth numbers compared with other wealth numbers 36
Bibliography 37
Further reading 37
Ask the analyst 37
Datamonitor consulting 37
Disclaimer 38
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List of Tables
Table 1: The rate of unemployment and average nominal wage growth in Hungary and Europe, 2004-2008 10
Table 2: Inflation has been variable, although generally relatively high, in Hungary between 2004 and 2008 11
Table 3: Market capitalization of Central and Eastern European stock exchanges 12
Table 4: Short-term deposit and money market rates, and change in consumer prices in Hungary 14
Table 5: The portfolio allocation of retail investors in Hungary 16
Table 6: Number of individuals in Hungary in euro bands (000s) 17
Table 7: Forecast number of individuals in Hungary in euro bands (000s) 18
Table 8: Value of onshore liquid assets in Hungary in euro bands (€bn) 18
Table 9: Forecast value of onshore liquid assets in Hungary in euro bands (€bn) 19
Table 10: Wealth Management Opportunity Index - Hungary 21
Table 11: Wealth Management Opportunity Index with values - Hungary 22
List of Figures
Figure 1: The unemployment rate in Hungary now eclipses that of Europe as a whole 10
Figure 2: The Budapest Stock Exchange has had a battering over the past five years 12
Figure 3: Deposit and money market rates have been high in Hungary, above the European average 13
Figure 4: Deposits dominate retail investors' portfolios in Hungary 15
Figure 5: The number of wealthy individuals in Hungary is set to continue to increase after 2009 17
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