All articles by PBI Editorial
PBI Editorial
Tapping new revenue seams
The The extent of the flight to quality by clients concerned about banking system stability is starting to be revealed in the earnings reports of a number of banks. Above-market deposit rates are being offered by some banks to try to retain market share. HSBC, considered one of the worlds strongest banks, was favourably affected by the search by investors for safe haven financial institutions, according to chairman Stephen Green.
The lucky country
But a new offshore tax amnesty signals concerns about tax evasion.The number of Australian millionaires is growing at a faster pace than in the rest of the world, helped along by a buoyant share market and the countrys plentiful natural resources.The number of Australians with financial assets of more than $1 million grew by 10.3 percent in 2006 to 160,600 individuals, according to the annual World Wealth Report from Merrill Lynch and business consultancy Capgemini
Jumbo mortgages emerge as growth product stream
Multi-million pound mortgages from many lenders are disappearing fast as banks and building societies, nervous over the credit crisis and wholesale funding drought, impose strict new limits on how much they will advance.Even where jumbo mortgages are available, some lenders are imposed huge arrangement fees ranging up to £40,000, depending on the size of the loan.Among lenders, Abbey, Nationwide, Chelsea and Intelligent Finance have all cut the maximum amount they will lend in recent weeks Mortgages for £2 million and more are still available at the Halifax, Bank of Scotland, and Birmingham Midshires but now come with steep arrangement fees.Mortgage brokers John Charcol and advisory Clegg Gifford Private Clients have reported problems in getting loans of more than £500,000 from high-street lenders
The ultra client becomes key
The ultra high net worth client segment, which accounts for less than 1 percent of all private banking clientele, last year expanded to represent 26 percent of private banking assets in Europe, an increase from the 23 percent recorded in 2005.At the same time, assets under management held by private banks for the ultras those with net assets of at least 30 million ($44 million) grew 27 percent last year This is more than twice the asset growth of the ordinary high net worth or affluent segments, according to McKinseys 2007 European private banking survey.Success in meeting the demanding needs of these sophisticated ultra clients was a major reason why top-performing private banks increasingly outclassed their rivals last year.Top-quartile wealth players grew by 31 percent, over ten times more quickly than bottom-quartile firms, clearly indicating a rising bar for capturing the full growth potential of the continents wealth management business, McKinsey says The difference in profitability is even wider: top-quartile players achieved profit margins of 62 basis points compared to only 2 basis points for bottom-quartile rivals.The best and the restGreater competition, increased professionalism, high growth in more demanding segments and more innovative product offerings have all helped widen the gap between the best and the rest, declares Frederic Vandenberghe, McKinsey partner and leader of the European private banking practice.Still, the private banking market overall continued to flourish in Europe last year
The golden age of global wealth
Private banking has come a long way since 13th century Geneva relaxed usury laws, so spurring the development of institutions that eventually were to become Swiss wealth managers But the development of todays huge global private banking industry has stunningly been compressed into an incredibly short period of only 20 years.For when Private Banker International first appeared back in 1987, few banks outside Switzerland offered sophisticated private banking
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Credit Suisse tells clients to use absolute return strategies in the new turbulence
Credit Suisse is signalling to clients that, amid the new volatility in the markets after the subprime crisis, they should consider remaining invested in the markets, and with the right strategies should still be able to grow their assets significantly in the longer term.The correct investment stance may be to invest across the cycle and mitigate the risk of losses with improved asset allocation models, its analysts say The Credit Suisse stance comes at a time when a number of private banks are starting to try to manage down clients expectations of future investment performance at a time of financial market uncertainty.Credit Suisse analysts say that total return strategies can be used to participate in long-term growth phases and control the risk of possible capital losses in the current market environment
Merrill looks for wealth growth abroad
Over the next five years, the firm wants to triple its non-US revenues in the global wealth arena.This will generate new growth as well as help create the stability of revenues that private client advisory businesses typically bring, according to the US brokerages new chairman and chief executive, John Thain.Most of the firms wealth business is still US-oriented, he said, speaking to a financial services conference in New York, declaring: One of the focuses you will see is growing the wealth management business overseas.Despite Merrills involvement in subprime turmoil, officials insist that its wealth operations are performing strongly, saying the firm saw $80 billion in net new asset inflows last year, the best since 2000 The core franchise is healthy and growing; the brand is alive and well, they said.The firm added more than 800 financial advisers to take the total to more than 16,000, the biggest workforce of any global wealth player.Thain did not elaborate on specific growth plans internationally but noted that the company overall was strongly represented in Brazil, India and the Middle East, although it needed to expand in high-growth China.Wealth management will increasingly be a core Merrill business, as it is a service that is much less sensitive than volatile areas such as investment banking and capital markets, he said
Under pressure on a number of fronts
Offshore private banking is facing pressures on a number of fronts, including the global financial crisis, according to Boston Consulting Groups global wealth trends study. It estimates assets under management held offshore totalled $7.3 trillion in 2007 or only slight larger than the $6.7 trillion for offshore holdings in 2006 Offshore is thus still contracting in relative size compared with the onshore market.
Northern Trust looks at move into Switzerland
Northern Trust, the major Chicago-based wealth manager, is looking at setting up operations in Switzerland as part of its expansion plans in the EMEA region, according to Kathleen Dugan, a senior-vice president for the firm. But Dugan, senior vice-president for corporate and institutional global product management, would not say whether the operation was likely to be a private banking, ultra high net worth or institutional business.
The flight from the small client
HSBC and UBS are extracting themselves from low-yielding UK private client accounts, often based around brokerage services, in favour of business with more lucrative higher net worth investors.This repositioning extends a developing trend for discarding brokerage-based accounts which are considered by growing numbers of private banks to be uneconomic, and which take up too much adviser resources Often, the accounts are held by legacy clients who have come with the brokerage operations acquired by private banks in recent years.In latest moves, HSBC Private Bank is to run down its lower-level client business, including broking