U.S. banks target family-company market

By Dan Wilchins

GENEVA (Reuters) - U.S. banks are setting up new departments to provide investment banking to family-owned companies and trying to persuade private bankers and investment bankers to work together for these clients.

If the departments work well, they could generate big business for both investment banks and private banks, consultants to the industry said.

Companies looking for debt or equity financing may eventually go public, creating fat fees for investment banks, while the individuals or families that own these companies can be private banking clients.

"You want to have the relationship before the big event happens," said Emilio Saracho, head of private banking for Europe, the Middle East, and Africa at JPMorgan Chase, at the Reuters Wealth Management Summit.

JPMorgan Chase's (JPM.N: Quote, Profile, Research, Stock Buzz) group focuses on strategic advisory work and operates as a joint venture between its private bank and investment bank businesses. The group has 11 people in Europe, a number it aims to double by next year.

Citigroup also treats its group as a joint venture.

"Over time, entrepreneurs need investment banking services," said Marianne Hay, chief executive officer for global wealth management-Europe at Citigroup (C.N: Quote, Profile, Research, Stock Buzz).

Close collaboration between investment banking and private banking provides obvious benefits for clients and has helped banks in Europe such as Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) and UBS

(UBSN.VX: Quote, Profile, Research, Stock Buzz).

Historically, however, the two areas have been reluctant to work closely together at many firms, particularly U.S. banks.

Some investment bankers are reluctant to refer clients to private banks, which they may perceive as an inferior part of the business, said Sebastian Dovey, a managing partner at Scorpio.

And larger U.S. investment banks in recent decades have focused on larger companies. Private bankers had little reason to refer clients holding smaller companies to their investment banks.

"Some tensions are there. That's always been an issue," Dovey said.

But banks seem committed to making these two groups work well together.

JPMorgan's Saracho, for example, worked in investment banking for over 20 years before taking over as head of private banking for Europe, the Middle East, and Africa. Citigroup's Charlie McVeigh, a former investment banking head, is spearheading its joint venture.

Said Scorpio's Dovey: "Banks are in version 2.0 or 3.0 of this. But it's such a perfect story, you'd expect it to work."