German deal redefines private banking priorities for BNP Paribas and HSBC

An evolving fragmented market, rich in entrepreneurs, has prompted BNP Paribas to focus on German growth, while HSBC continues to emphasise its Asian business strategies.

BNP Paribas' acquisition of HSBC's private banking activities in Germany marks a significant shift of the tectonic plates in European wealth management.

A German market of entrepreneurs and wealthy families, not traditionally well-served by domestic institutions, is now increasingly coming into play for cross-border firms.

In September, the French giants signed the deal, set to close in the second half of 2025, to push the bank's assets under management (AuM) in Germany to more than €40bn ($44bn), backed by their long-term strategy to double the size of the German business book.

“Germany has been identified as a key strategic market for the group,” says Vincent Lecomte, Paris-based chief executive officer of BNP Paribas Wealth Management, pledging to expand across all the bank’s business lines in this growth market. “We are one of the leading non-German banks in the country.”

There are several reasons for the bank identifying Germany as a strategic priority. Firstly, Germany is the largest economy in Europe, even if it has performed poorly in recent times. Its density of wealthy clients in major cities is also particularly appealing to Mr Lecomte. The group has been targeting wealthy individuals, German families, and entrepreneurs by leveraging all of its expertise, whether from a real estate or corporate banking standpoint. “HSBC has been serving these wealthy clients for a long time, so it fits really well with our objectives to grow further,” he states.

European attraction

Some experts believe the deal sets a marker for the development of the European private banking market. “Germany's substantial market size and economic depth make it an increasingly attractive target for wealth managers,” says Carsten Boehme, managing director of Trencavel Cie, a German-based advisory business. Currently, the market for managing assets of mass affluent and high net worth individuals is dominated by savings banks and mutual banks, leaving the door open for a major player to enter the fray.

Although the marketplace is crowded, ageing ownership of Germany’s independent wealth managers is “accelerating the need for succession planning and consolidation”, with many of these firms struggling to ensure business continuity, according to Mr Boehme.

A rapidly ageing population is also expected to restrict economic growth, according to the IMF. “These dynamics, combined with the size and complexity of the market, position Germany as an evolving battleground for wealth management,” believes Mr Boehme. “Traditional players and new entrants alike are vying to capture a shifting landscape of demand and service needs.”

Germany is a crucial private banking growth market, and according to The Boston Consulting Group (BCG), wealth creation in the country is projected to grow by 7 per cent annually through to 2028, particularly in client segments like medium-sized companies, entrepreneurs, and business-owner families.

“Current market movements are unsurprising as consolidation trends in the European banking industry have been ongoing for years, spurred by the sector’s fragmented landscape, offering opportunities to achieve scale and efficiency,” says Dean Frankle, managing director and partner at BCG.

Many banks are expanding or intensifying their wealth management operations, he says. “One of the options is inorganic growth – this has become increasingly appealing, driven by low valuations across the banking sector,” says Mr Frankle.

Focus on their strengths

The German deal also puts the HSBC growth strategy, concentrated main on Asian private banking, under increased scrutiny.

“For HSBC, international markets mean anything outside of the UK or Asia,” says Ray Soudah, founder of MilleniumAssociates, an M&A and corporate advisory consultancy in Zurich. “For anything outside of these domestic markets, they will never be able to achieve adequate scale needed for such a large bank.”

This deal allows both banks to focus on their strengths, says Mr Soudah – Europe for BNP Paribas, and Asia and the UK for HSBC. “I wouldn’t define this as exiting, or another step in exiting, for HSBC,” he says. “Rather, this is another step in focusing on those regions where they can achieve economies of scale.”

“I wouldn’t define this as exiting, or another step in exiting, for HSBC. Rather, this is another step in focusing on those regions where they can achieve economies of scale”

Ray Soudah, MilleniumAssociates

The deal will give HSBC “more momentum” to achieve growth in core markets of Asia and the UK, believes Mr Soudah.

Global banks are busy weighing up regional and international opportunities when they make these strategic decisions. The Asia-Pacific (Apac) region is projected to be a key driver of global financial wealth for the next five years, according to BCG. It is expected to contribute approximately 30 per cent of the world’s total financial wealth by 2028.

With Apac home to nearly 60 per cent of the global population, opportunities are becoming increasingly attractive, according to BCG’s Mr Frankle. “It is encouraging to witness rapid development of the wealth management industry, particularly in serving the growing mass-affluent segment, driven by technological advancements and product innovation,” he says.

While Asia is gaining prominence, Europe will remain a crucial market for the continent’s leading banks. “Europe’s role is evolving,” says Mr Boehme of Trencavel Cie. “Mature European markets often favour traditional wealth management products, while Asia’s younger and more dynamic client base is more open to innovative solutions like AI-managed investments and cryptocurrencies.”

There are critical differences in demand patterns for financial products, he comments, with Europe focusing on more sustainable investing, wealth preservation and family office services. At the same time, Asia is “pushing the envelope” with “cutting-edge” financial technologies.

“Europe’s legacy wealth and strong financial infrastructure guarantee its continued relevance in the evolving wealth management landscape,” he affirms.