With profits up 20% in the first half the year, Swiss giant Vontobel talks to Valentina Romeo about how it has remained strong despite economic uncertainty and tightening of regulations.
Talking at a London briefing last week, chief executive Zeno Staub revealed some of the secrets behind the company generating a net profit of CFH76.1 million ($84.18) in the first half of 2013, compared to CHF63.2 million for the same period last year, but also warned that the market remained challenging.
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"We had a decent first half-year mainly driven by continued success in asset management and private banking, especially the business in-line with asset management. We have now built up very strong global franchise, with a credible access in all the mature markets such as the US and UK, and selected European countries, the Middle East and Asia," said Staub.
However , he added: "We are in a solid, but I admit, challenged position, as an industry."
Swiss banks are facing crippling and ongoing uncertainty about tax regulations with several countries, including the United States.
Vontobel has pulled out of Austria, Milan and Dubai in recent years.
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By GlobalDataStaub said the company will be refocusing its franchising, and revealed the next strategic plan: "We want to refocus most of the markets to a cross-border approach, meaning that, whenever possible, we can leverage and use the investment services based in Switzerland," he said.
"We have a long-term unbroken track record in the multi-asset arena and we see an increasing dynamism and demand for multi-asset class solution, especially in the German institutional market."
Vontobel net profit included one-off costs of CHF10.6 million related to changes in its cross-border wealth management business and a final provision of CHF3.1 million related to the withholding tax agreement with the UK. Impressively, pre-tax profit at Vontobel’s private banking unit increased by 49 per cent from CHF20.3 million to CHF30.2 million in the first half of 2012.
Thanks to its successful technology implementation, Vontobel recently said it has attracted more than 4000 professional investors in Europe and Asia, bringing together assets under management totalling more than CHF1 trillion.
UK focus
In the UK, Vontobel has a longstanding business relationship that dates back to the early 1980s and established a local presence in 2007. "HNWI are both sophisticated global investors who are used to thinking in a global investment universe, across all assets and currencies", Staub explained.
"We are in a credible position to serve UK dom and non- dom HNWIs as the Swiss investment approach has always been global for various different reasons. We needed to diversify abroad and we can see that this resumes very well with this type of clientele."
Destination US
Staub made it crystal clear that the US market remains attractive for Swiss private banks. Indeed, Vontobel’s most powerful and successful boutique for asset management remains in New York: "The US is simply too big, too wealthy and too important," he commented during the briefing.
Though many private banks are targeting emerging markets, eager to get a slice of the action, Staub said many of the ventures into these areas "will end in tears" as margins are less attractive than in the US.
"In the US there is still a huge creation of wealth, a lot for the 4th or 5th generation, who are used to having their wealth in financial assets which they can then diversify. It is a completely different pattern if you go into an emerging market", he explained.
Vontobel has been in the United States since the 1980s and had CHF22.9 billion ($24.7 billion) assets under management (AuM) with about 20 billion in pension funds and other institutional investors. At the end of June, it had CHF16.5 billion AuM in emerging markets.
In regards to diversifying with M&A, Staub added: "We prefer to acquire what we already do and understand. On the private banking side, I would buy in Switzerland because you have scale; on the asset management side we are more flexible. We could merge to buying into different countries, "he explained.
