Cost income ratios for private banks are at
their highest rate for the past 10 years suggesting banks need to
improve efficiency right through their organisations, according to
McKinsey’s private banking survey.

The survey found the industry’s operating
profit pool was 25 percent below 2008 levels, although it said the
long-term outlook for private banking remained positive.

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Last year PBI noted that cost/income ratios were getting
squeezed by falling profits forcing banks to review their cost
bases and look at new business models.

The report said banks should improve the
efficiency and effectiveness of the front-line, middle and
back-office to account for lower revenue margins.

This would not only include the optimisation
of in-house activities but should also involve using outsourcing
options.

Other key figures included:

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  • Assets under management (AuM) increased by an
    average of 10 percent in 2009, which took them back to 2006
    levels.
  • Profit margins went down from 26 to 20 basis
    points (bp) of AuM.
  • Cost/income ratio rose from 71 percent to 76
    percent.
  • Offshore market net inflow dropped an average
    of 2 percent while onshore market net inflow averaged an increase
    of 3 percent.

McKinsey’s survey is based on data from 160
banks across all different business models and 40 countries around
the world.