By Emma Rumney and Andrew MacAskill
LONDON (Reuters) - After three centuries as banker to Britain's rich and famous, from Charles Dickens to Queen Elizabeth II, Coutts, one of the world's oldest banks, is trying to modernize.
Britain's largest private bank wants to update not only its technology and ways of doing business, but also its 325-year-old brand to sell more products to more customers, tackle competition from international rivals and boost revenues.
Chief Executive Peter Flavel aims to increase Coutts' appeal to a younger generation of wealthy Britons, including vloggers, gamers and other entrepreneurs getting rich from new technologies, as well as its traditional clients.
"We don't want to live in the history or live in the past, we need to be modern and contemporary and relevant today," Flavel told Reuters.
"The client base we have here is of course what you would expect, the landed estates and the gentry, that traditional wealth, and that's a big part of what we've had as a bank.
"But the bigger part of what we do today is banking entrepreneurs and helping them develop their businesses."
Australian-born Flavel, previously CEO of private wealth management at JP Morgan in Asia and global head of Standard Chartered's private bank, was brought in by parent Royal Bank of Scotland (LON:RBS) 18 months ago.
Since his arrival, he has pushed for stronger cooperation between the private bank and the universal services offered by RBS.
He has also been exploring more quirky ways to update Coutts' image.
One of these more off-beat projects is the expansion of a roof garden at Coutts' central London headquarters, adding fresh fruit and vegetable patches and three bee hives, which produce Coutts-branded honey soon to be given out to new customers.
"We're having a bit of a think about how we might just be a little different," Flavel said.
"Banks are serious and boring and risk averse. You can create that little sense of not taking yourself too seriously at - and this is the big one - the appropriate time, because you're dealing with people's money."
Flavel has focused on tapping RBS's commercial bank for client referrals, which has helped to broaden its customer base.
Entrepreneurs now make up a growing portion of its business, and outside of London account for 80 percent of the client base.
Coutts is adding 1,700-1,800 new clients annually. But RBS's wealth management division has struggled to translate a 2.8 percent increase in customer deposits in the first half of this year into revenues, which fell by around 3 percent.
"Private banking is not a volume game," Flavel said. "New clients are interesting but new clients with significant amounts of their relationship with us are much more interesting."
To that aim, the bank's specialist advisers now have to work across traditional product silos to try to tap into the whole spectrum of their clients' financial needs, from borrowing to wealth management.
But Coutts also now faces competition from international rivals, including Deutsche Bank (DE:DBKGn) and Julius Baer, which are expanding private banking in Britain.
After suffering big losses at their investment banks from huge bets on the U.S. housing market and costly legal settlements, many European lenders are turning to private banking in the hope that the traditionally low-risk business can provide more stable returns.
But the business of managing the fortunes of the world's wealthy is not without its challenges.
Many clients are still risk adverse even 10 years on from the financial crisis, while the increased competition from traditional banks as well as online platforms is putting pressure on the amount banks can charge for their services.
Private banking accounts for less than 5 percent of the profits of state-backed RBS, which chose to keep Coutts through a major restructuring over the past decade. But it sold off Coutts' international operations in 2015, leaving it to focus solely on Britain's wealth market, worth about 825 billion pounds.
Since its establishment in 1692, the core of Coutts' business has been looking after the wealth of Britain's aristocracy, landed gentry and celebrities.
The latter includes sports stars - a significant number of the England football team for instance.
But when it comes to attracting up-and-coming wealth, Sebastian Dovey, analyst at wealth management research firm Scorpio Partnership, said Coutts has a challenge ahead.
"They (Coutts) can play the prestige card ... but that doesn't rub so well now as perhaps it used to," he said.
"We're in a much more abrasive consumer market. They're top quartile but they have to understand that they don't have a natural right to winning entrepreneurs."
Helped by cost-cutting, RBS's private banking division boosted its operating profit by about 60 percent to 82 million pounds in the first half of the year, but its cost-income ratio remains high, at 72.3 percent.
For Flavel, some small costs are worth absorbing to enhance clients' experience, such as exchange rate fees for users of its multi-currency card.
Coutts is also spending 20 million pounds a year on digital initiatives, including a new online platform launched earlier this year that lets clients execute their own investments.
"We need that mixture of the history and the future," Flavel said. "That's exciting and a bit of a challenge at the same time."
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