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 Researchers simplify tiny structures' construction drip by drip
12.11.2018 | Princeton University, Engineering School

nachricht Mandibular movement monitoring may help improve oral sleep apnea devices
06.11.2018 | Elsevier

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: Nonstop Tranport of Cargo in Nanomachines

Max Planck researchers revel the nano-structure of molecular trains and the reason for smooth transport in cellular antennas.

Moving around, sensing the extracellular environment, and signaling to other cells are important for a cell to function properly. Responsible for those tasks...

Im Focus: UNH scientists help provide first-ever views of elusive energy explosion

Researchers at the University of New Hampshire have captured a difficult-to-view singular event involving "magnetic reconnection"--the process by which sparse particles and energy around Earth collide producing a quick but mighty explosion--in the Earth's magnetotail, the magnetic environment that trails behind the planet.

Magnetic reconnection has remained a bit of a mystery to scientists. They know it exists and have documented the effects that the energy explosions can...

Im Focus: A Chip with Blood Vessels

Biochips have been developed at TU Wien (Vienna), on which tissue can be produced and examined. This allows supplying the tissue with different substances in a very controlled way.

Cultivating human cells in the Petri dish is not a big challenge today. Producing artificial tissue, however, permeated by fine blood vessels, is a much more...

Im Focus: A Leap Into Quantum Technology

Faster and secure data communication: This is the goal of a new joint project involving physicists from the University of Würzburg. The German Federal Ministry of Education and Research funds the project with 14.8 million euro.

In our digital world data security and secure communication are becoming more and more important. Quantum communication is a promising approach to achieve...

Im Focus: Research icebreaker Polarstern begins the Antarctic season

What does it look like below the ice shelf of the calved massive iceberg A68?

On Saturday, 10 November 2018, the research icebreaker Polarstern will leave its homeport of Bremerhaven, bound for Cape Town, South Africa.

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Optical Coherence Tomography: German-Japanese Research Alliance hosted Medical Imaging Conference

19.11.2018 | Event News

“3rd Conference on Laser Polishing – LaP 2018” Attracts International Experts and Users

09.11.2018 | Event News

On the brain’s ability to find the right direction

06.11.2018 | Event News

 
Latest News

Nonstop Tranport of Cargo in Nanomachines

20.11.2018 | Life Sciences

Researchers find social cultures in chimpanzees

20.11.2018 | Life Sciences

When AI and optoelectronics meet: Researchers take control of light properties

20.11.2018 | Physics and Astronomy

VideoLinks
Science & Research
Overview of more VideoLinks >>>