“The flight to quality has certainly impacted
our balance sheet and our results, both for last year and
continuing into this year. The private bank has been a beneficiary
of that,” he told PBI, speaking at the bank’s first-half
earnings presentations.

HSBC’s private banking results contain some
revealing insights into the competitive landscape as wealth
managers jockey to hold on to market position.

It recorded what it described as an
improvement in net interest income in the half in an environment
where competitors are offering “above-market deposit rates to
attract and retain clients.”

Despite a decline in market values and these
sweetened rates by rivals, client assets at $421.3 billion remained
well ahead of the $370 billion in the comparable period, assisted
by net new money of $14.5 billion.

GlobalData Strategic Intelligence

US Tariffs are shifting - will you react or anticipate?

Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.

By GlobalData

Learn more about Strategic Intelligence

Overall pre-tax private banking profits at
HSBC increased by 5 percent to $822 million.

This was primarily due to strong performances
in the offshore markets of Switzerland and Monaco, offsetting what
HSBC called lower revenues in Asia due to reduced client trading.
Hong Kong, where HSBC is historically strong, saw private banking
operating profits drop to $123 million from $161 million in the
first-half of last year. Lower trading volumes, as China’s stock
market dropped, were a factor.

Private banking is becoming a more significant
contributor to the HSBC bottom-line as, like other banks, it
grapples with the impact of bad loans in the US. Private banking
contributed 8 percent of HSBC’s profit before tax, up from historic
levels of around 4 to 5 percent, as the group reported an overall
profit decline of 29 percent after providing for bad debts.

Green said: “Importantly, we are working hard
at making sure the private bank gets very good referral between
itself and the investment bank.

“That is where the particular opportunities
are – the owners of commercial businesses that we bank around the
world; we want to make sure [we tap them]. We have not always been
as good as I think we are now getting at tapping that seam”.

CS, Baer add staff

Results from Credit Suisse (CS) and
Julius Baer showed both are winning private banking market share
while rival UBS remains beset by problems.

CS reported that net new money in its wealth
management unit rose to CHF15.4 billion ($14.8 billion), more than
twice the forecast amount and up from CHF13.3 billion a year ago.
The inflow last quarter included about CHF3.5 billion in
Switzerland.

Its private banking business, which consists
of wealth management and corporate & retail banking businesses,
reported pre-tax income of CHF1.22 billion for the second quarter,
a year-on-year fall of 12 percent.

Brady Dougan, CS chief executive said, “The
quarter’s strong net new assets in private banking and other client
flows across our franchise underscore the trust that clients are
placing in Credit Suisse. We anticipate that the current
challenging market conditions will persist over the near to medium
term and we will continue to manage our business
conservatively.”

CS’s net new assets are growing nicely,
suggesting it is “gaining market share,” Dirk Becker, an analyst
with Landsbanki Kepler, said.

The bank has recruited 450 relationship
managers over the past 12 months across all regions. “About 40
percent of our net new assets come from relationship managers that
are in their first three years with Credit Suisse,” chief financial
officer Renato Fassbind said.

At Julius Baer, total assets under management
fell 10 percent in the first half versus second-half 2007 amid
financial market turmoil, to total CHF364 billion. Baer said that
while it did not experience any losses related to the credit and
liquidity crisis, difficult equity and debt market conditions and
the strong franc hurt its asset base.

But it generated CHF10 billion of net new
money, of which private banking operations accounted for CHF8
billion versus CHF5 billion a year earlier.

Its results were overshadowed by a major
outflow from hedge fund manager GAM, part of the bank’s asset
management unit, which shed CHF18 billion in the first half. This
attrition is believed to be linked to problems at UBS, which
remains GAM’s biggest client and which sold the hedge fund to Baer
in 2005.

Meantime, Baer is continuing to recruit new
advisors to pick up client business from rivals, targeting a 10
percent increase this year to take the total head count to about
600.

Elsewhere, EFG International reported that net
new money amounted to CHF14 billion, a new record, in the
first-half of 2008. Assets under management increased by 16 percent
to CHF100.9 billion.

Deutsche Bank said market conditions were
responsible for a 17 percent fall in the pretax profit of its asset
and wealth management division in the second quarter. The wealth
division registered pretax profit of €242 million ($377 million),
down from €292 million in the second quarter of 2007.

At Société Générale, net inflows into private
banking totalled €2 billion in the second quarter versus €2.3
billion for the same period of 2007. But it was much higher that
the first quarter when the bank brought in just €400 million,
caused in part by the bank’s equity derivatives rogue trader
scandal in January.

The French bank’s pretax profits fell 3.8
percent to €51 million in the quarter. Assets under management,
including private banking client holdings, dropped to €381 billion
from €467.2 billion in the first-half of the year, due to the
decline in equity markets, an outflow of funds in asset management
and unfavourable exchange rates.

Asia helps Citi

Citigroup’s wealth management
business is being supported by growth in Asia, which helped propel
its wealth management revenues to a record in the second quarter,
pulling ahead of rival Merrill Lynch.

Citi’s wealth management unit reported $3.3
billion in revenues, a rise of 4 percent after double-digit growth
from operations abroad which offset lower revenue from North
American operations.

By contrast, Merrill’s wealth management unit
posted a 5 percent fall in second-quarter revenues to $3.4 billion.
Revenues at its global private client unit were also down by 3
percent to $3.2 billion this quarter due to less transaction and
origination revenue.

Citi’s total client assets slipped to $1.6
trillion, down 7 percent from last year’s second-quarter asset
figures. Merrill’s total client assets also stood at $1.6 trillion
this quarter, down 5.7 percent from last year’s second quarter.

At Citi, second-quarter revenue growth in
wealth management largely came from Asia, where its business
recorded 20 percent growth in revenue. Europe, Middle East, and
Africa revenues grew 12 percent and Latin America 11 percent.
Revenue from North America, which accounts for nearly
three-quarters of the total, dropped slightly, by 1 percent this
year. The higher growth in Asia reflects the firm’s full ownership
of Nikko Cordial in Japan.

At JPMorgan asset management and private
banking second quarter earnings fell 20 percent to $395 million,
amid lower performance fees and higher costs. But assets under
management rose 7 percent or $76 billion to $1.2 trillion
reflecting growth in private client services. Of the total, $15
billion came from the acquisition of Bear Stearns earlier in the
year.

Private bank revenues grew 18 percent to $765
million due to higher deposit and loan balances and higher
placement fees.

Bank of America’s global wealth and investment
management division reported second quarter net income of $573
million, little changed on the year-ago quarter. Assets under
management totalled $589.4 million, a year on year increase of 4
percent.

US Trust, Bank of America Private Wealth
Management’s net income increased by 25 percent to $152
million.