LONDON When Royal Ascot gets under way on Tuesday, the race meeting's official bank will be continuing a tradition almost as old as the event that remains one of the highlights of the British aristocracy's Social Season.
Family-owned Weatherbys Bank, responsible for taking in entry fees, paying out prizes and handling accounts of racehorse owners, was founded in 1770 and has spent almost a quarter of a millennium as the bank of choice for British horse racing.
More recently, however, it has moved into the highly fragmented private banking arena, where local banks with balance sheets of only a few billion pounds fight it out against titans such as JPMorgan, Royal Bank of Scotland (RBS) and HSBC.
In spite of an environment in which some of the biggest banks have imploded, the precocious challengers continue to grow.
While the titans package their private banks with asset management services and trading platforms, Weatherbys marries its two key businesses by entertaining clients at top racing events.
But a bigger lure, perhaps, is the famed personal touch offered by private banks. A few years ago, one client rang the bank when he realised while shopping that he had forgotten his wallet. Weatherbys, understanding the importance wearing one's top hat at Ascot, saved the day.
"We managed to arrange payment over the phone so the client could buy his top hat and travel on to Ascot," said Roger Weatherby, the seventh generation of the family to lead the bank.
DEFYING THE ODDS
That level of service is a big draw for clients such as Jerry Gilmore, a retired surgeon who has been a Weatherbys client for nine years. "Trusting my banking to a smaller business with a secure heritage has been a far better experience than when I used larger banks," he said.
The numbers support Weatherby's claim that the bank has defied the odds. Its banking business - comprising private banking, race banking and an asset finance unit - grew 30 percent in the three years to 2013, bringing total assets to almost 322 million pounds. Deposits grew 35 percent to 288 million pounds.
Weatherby says that the private banking arm, where only 25 percent of clients have links to racing, has been a big contributor, picking up clients from larger competitors who, distracted by other problems, have taken their eye off the ball.
But his isn't the only bank that has been growing. Records from Companies House show that Adam & Co, a private bank in the RBS stable, increased deposits by 10.5 percent to 1.9 billion pounds last year. HSBC's UK private bank lost 165 million pounds of deposits over the same period, but still had 5.4 billion pounds at the end of 2012.
C. Hoare & Co, another family-owned bank, increased deposits by 268 million pounds to 2.07 billion pounds in the year to March 2012.
"I don't think it's right to say that a smaller player has an advantage," said Jeremy Jensen, private banking leader at PricewaterhouseCoopers' London practice. "There's no one business model. There are small, medium and large players, all of whom are doing well, and conversely not doing well."
Beyond the big versus small debate, clients see safety in the heritage and conservatism of the bank, Weatherby says.
Weatherbys' capital cushion is a very comfy Tier 1 ratio of more than 16 percent, against the 9 percent demanded by EU regulators. While most banks borrow so they can lend more than they've taken in, the Weatherbys loan book amounts to less than half the deposits.
Presentation of financial information to clients is also different. "It's a very, very simple balance sheet and profit-and-loss (statement); you could pick it up and read it and understand the whole thing in about five minutes," said Adrian Crichton, private banking director at Weatherbys.
Accounts for larger banks are provided quarterly and can run for several hundred pages. The private banking offshoots typically file shorter accounts to Companies House.
MORTGAGES FOR MILLIONAIRES
Sebastian Dovey, managing partner of London-based wealth manager Scorpio Partnership, said that increases in funds placed with independent banks did not always mean they were taking clients from the larger houses.
"Because of the depositor protection scheme, particularly with larger accounts, there has been quite a strong push towards prudently distributing it across multiple banks," he said.
But Weatherbys is also a lender, advancing money against art, share portfolios and homes.
"The other banks have pulled in their horns generally, but also some large building societies have completely come out of the million-pound-plus mortgage," Weatherby said.
The bank's maximum mortgage is 5 million pounds and loans are typically for 40 percent of the purchase price. Loan losses have been "remarkably low", Weatherby said.
Ambitions for the future are for organic growth, with an open mind to small acquisitions. Low risk is key, with Weatherby viewing his generation as the "guardians" for those to follow.
"If there are areas of business that you haven't quite tackled, then there is another generation that can take that opportunity and run with it in their time," he said.
For now, however, the focus is on making this a productive Ascot, helping clients through one of the highlights of the British racing calendar.
(Editing by David Goodman)