Analyst estimates for 2011 show Credit Suisse may become larger than rival UBS in one of the key areas of their private banking assets under management. Strong growth in Asia and a record start to 2010 at Credit Suisse, coupled with more outflows at UBS, indicate the crossover will happen in this year’s final quarter.
Credit Suisse could eclipse UBS as Switzerland’s largest wealth manager in assets under management by the end of this year if it maintains its current rate of growth.
In a research note, Morgan Stanley analyst Huw van Steenis said a record start to the year for Credit Suisse’s private banking business, excluding retail brokerage activities, would see it surpass struggling UBS going into 2011.
Credit Suisse announced it had a record start to 2010, which van Steenis reads as better than CHF16 billion ($15 billion), or 8 percent net new money for the first quarter. Van Steenis expects 2010 outflows at UBS of around CHF37 billion
Asia-Pacific assets under management at Credit Suisse were particularly strong. They increased 45.6 percent to CHF67 billion – the highlight of a bullish set of results for the bank in 2009.
Asia has been the growth engine of Credit Suisse’s private bank in 2009, though Marcel Kreis, head of Asia-Pacific private banking, has been cautious about an aggressive shift in focus towards the region, whether in assets under management or relationship managers.
In an interview with PBI he said there may be a “rebalancing of relationship managers in favour of Asia when conditions start to improve”, but that the current balance (around 12 percent of the bank’s RMs are in Asia) was unlikely to change significantly.
HSBC has been the most aggressive in its strategy towards Asia, with CEO Chris Meares claiming in another interview with PBI that the bank would have around half of its assets under management in Asia by 2014, up from an estimated current level of around 30 percent.
There have been reports Meares is in talks to relocate to Hong Kong given the speed of growth in the region, though he denied such a move was likely at the PBI wealth conference in November. The head of JPMorgan’s international private banking business, Douglas Wurth, recently relocated from New York to Hong Kong.
Net new assets from wealth management clients at Credit Suisse (which excludes institutional flows) totalled CHF108.6 billion, up 5.3 percent for the year, compared to 5.8 percent in 2008. The bank posted income before tax of CHF3.651 billion for 2009 in its private banking division, down five percent on last year. Income across the group was CHF6.411 billion.
“In a market that is undergoing significant structural changes, our private banking business has outperformed,” said Brady Dougan, the bank’s CEO.
Credit Suisse’s fourth-quarter private banking profit was down 1 percent on the third quarter and up 66 percent on the same period last year, at CHF857 million.
UBS shed CHF33.2 billion in client assets in the fourth quarter, taking its outflows for the year of CHF101.3 billion, 6.3 percent of 2008 year-end assets.
The 2009 net new money figures are only slightly better than those of 2008, when CHF123 billion (5.4 percent) was moved out of the bank by clients. In percentage terms the 2009 figures are worse, because wealth management assets under management (AuM) at the start of 2008 were higher, at CHF2.3 billion. The bank incurred CHF8.5 billion of client outflows as Italian clients repatriated their assets following a tax amnesty in the country, due to end in April.
UBS CEO Oswald Grübel described the fourth-quarter outflows as “disappointing”. He said the bank was now profitable across all divisions for the first time since the start of the financial crisis. Wealth management made a fourth quarter net profit of CHF1.109 billion, up 40 percent on last year. Overall net profit at the bank was CHF1.205 billion.
An additional challenge is the rate at which UBS continues to shed client advisers – the bank reported a 25 percent fall last year. This leakage may begin to reverse with the bank's return to profitability but assurances so far have been few and far between.
Many see the man responsible for transforming the fortunes of Credit Suisse as the best man for the job, and Grübel's performance since taking control of the bank early last year has been complemented. The announcement that UBS won’t be awarding senior staff CHF300m in cash bonuses after failing to meet internal profit targets should also serve to restore client confidence to some degree, even if its impact on staff satisfaction is less certain.
Chris Skinner, banking analyst and chairman of the Financial Services Club, said: “Ossie Grübel is doing a good job. He has been there a year and people think he is turning it around. He seems to be putting in quite a strong management grip on the company and seems to be moving it forward.”