Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Swiss private banking in clinch with high cost level

23.10.2013
Internationally as well as in Switzerland, the assets under management of private banks increased in 2012. The cost/income ratio at Swiss private banks remains critical.

Given the high costs at some smaller, personnel intensive banks, some consolidation is looming in the long run. Future business models need to cater to tax-compliant and performance-sensitive clients.

These are the conclusions from the latest International Private Banking Study published by the Department of Banking and Finance at the University of Zurich.

For the international wealth management industry, 2012 was a more benign year than the harsh 2011. Due to favorable stock and bond markets the volumes of managed funds increased, though not returning to pre-crisis levels. In addition, most banks managed to attract new funds. Nevertheless, the biggest wealth managers lost some market share to medium-sized competitors.

Post-crisis low turnover and low interest rates still put pressure on returns, while cost levels remained sticky. The cost/income ratio remains critical even though gross margins on managed assets stabilized from 2011 to 2012. This is particularly true for Swiss banks and, after a significant deterioration over the last few years, for Liechtenstein banks.

Swiss banks: business models for tax-compliant and performance-sensitive Clients

International initiatives against tax evasion and pressure on offshore oriented private banking centers have hit Switzerland hard. Bank data theft, the fear of involuntary disclosure and various tax amnesties have led to the loss of profitable client mandates for banks. The Federal Court ruling to limit commission fees is another challenge to the Swiss wealth management business model. “The traditional offshore model servicing mainly price-insensitive clients is making way for new strategies, this time directed at tax-compliant and performance-sensitive clients,” says Prof. Urs Birchler, the lead author of the study.

Despite a challenging international political environment, Swiss financial institutions managed to increase their assets under management from 2011 compared to 2012, due to favorable market conditions, including stabilized USD and EUR exchange rates, on the one hand and successful efforts to attract new money on the other. Five banks dominate the Swiss private banking market with a market share of 72%, among them the international leaders UBS and Credit Suisse with a joint market share of 56%.

Likely consolidation of smaller Swiss banks in the foreseeable future
The erosion of gross margins observed since 2006 has come to a halt, with smaller banks performing slightly better than bigger ones. In revenue-per-employee figures and in cost/income ratios, though, the more labor-intensive smaller banks are falling behind their bigger competitors. “For all Swiss wealth managers, the cost levels remain high, but for some smaller banks, costs may be too high in the long run,” warns Urs Birchler. “Consolidation seems unavoidable. In the future, additional costs imposed on the banks by increased international regulation may considerably change the face of the industry and in turn threaten the survival of a number of long-established Swiss private banks.”

Positive net new money figures over the last three years and slightly improved cost-income ratios in 2012 suggest that the banks are rising to their challenges. “Be that as it may, many banks still have some potential for further cost optimization through careful choice of out- and in-sourcing services,” states co-author Christian Bührer. According to the authors, Swiss banks that are already strong in asset management might improve even further if two factors were to change: the abolition of the Swiss stamp duty and gaining full access to the European markets. “Swiss wealth managers are thus challenged on two counts: for one, to revise their business models in the light of tax-compliant and performance-sensitive clients, and second, to cope with the ever present cost pressure,” concludes Christian Bührer.

Literature:
International Private Banking Study 2013, Urs Birchler, Christian Bührer, René Hegglin, Lukas Meier, and Florian Reeh, October 23, 2013.
Background
The sixth issue of “The International Private Banking Study“ investigates the competitiveness of 190 private banking institutions from 11 different countries (Switzerland, Austria, the Benelux countries, France, Germany, Italy, Liechtenstein, UK and the US). Analyzed aspects include profitability, operational efficiency, assets under management and net new money developments.

Nathalie Huber | Universität Zürich
Further information:
http://www.mediadesk.uzh.ch

More articles from Studies and Analyses:

nachricht Amputees can learn to control a robotic arm with their minds
28.11.2017 | University of Chicago Medical Center

nachricht The importance of biodiversity in forests could increase due to climate change
17.11.2017 | Deutsches Zentrum für integrative Biodiversitätsforschung (iDiv) Halle-Jena-Leipzig

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: First-of-its-kind chemical oscillator offers new level of molecular control

DNA molecules that follow specific instructions could offer more precise molecular control of synthetic chemical systems, a discovery that opens the door for engineers to create molecular machines with new and complex behaviors.

Researchers have created chemical amplifiers and a chemical oscillator using a systematic method that has the potential to embed sophisticated circuit...

Im Focus: Long-lived storage of a photonic qubit for worldwide teleportation

MPQ scientists achieve long storage times for photonic quantum bits which break the lower bound for direct teleportation in a global quantum network.

Concerning the development of quantum memories for the realization of global quantum networks, scientists of the Quantum Dynamics Division led by Professor...

Im Focus: Electromagnetic water cloak eliminates drag and wake

Detailed calculations show water cloaks are feasible with today's technology

Researchers have developed a water cloaking concept based on electromagnetic forces that could eliminate an object's wake, greatly reducing its drag while...

Im Focus: Scientists channel graphene to understand filtration and ion transport into cells

Tiny pores at a cell's entryway act as miniature bouncers, letting in some electrically charged atoms--ions--but blocking others. Operating as exquisitely sensitive filters, these "ion channels" play a critical role in biological functions such as muscle contraction and the firing of brain cells.

To rapidly transport the right ions through the cell membrane, the tiny channels rely on a complex interplay between the ions and surrounding molecules,...

Im Focus: Towards data storage at the single molecule level

The miniaturization of the current technology of storage media is hindered by fundamental limits of quantum mechanics. A new approach consists in using so-called spin-crossover molecules as the smallest possible storage unit. Similar to normal hard drives, these special molecules can save information via their magnetic state. A research team from Kiel University has now managed to successfully place a new class of spin-crossover molecules onto a surface and to improve the molecule’s storage capacity. The storage density of conventional hard drives could therefore theoretically be increased by more than one hundred fold. The study has been published in the scientific journal Nano Letters.

Over the past few years, the building blocks of storage media have gotten ever smaller. But further miniaturization of the current technology is hindered by...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

See, understand and experience the work of the future

11.12.2017 | Event News

Innovative strategies to tackle parasitic worms

08.12.2017 | Event News

AKL’18: The opportunities and challenges of digitalization in the laser industry

07.12.2017 | Event News

 
Latest News

Engineers program tiny robots to move, think like insects

15.12.2017 | Power and Electrical Engineering

One in 5 materials chemistry papers may be wrong, study suggests

15.12.2017 | Materials Sciences

New antbird species discovered in Peru by LSU ornithologists

15.12.2017 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>