initiative seen aimed at closing the gap on its bigger rival, the
troubled UBS, has outlined aggressive plans to grow its global
wealth management business this year and beyond.
It plans to add about 1,000 new private bankers by 2010, taking the
total to 4,100, Credit Suisse private banking CEO Walter Berchtold
disclosed.
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Medium-term targets for wealth management include a pre-tax income
margin of 40 percent and growth of net new money of 6 percent,
driven by further growth of Credit Suisse’s One Bank
investment-private banking strategy as well as its targeting of
ultra-high net worth clients.
Although not directly mentioning UBS’s huge losses related to US
subprime mortgage exposures, Berchtold declared in an investor
presentation that Credit Suisse is well positioned to “excel” in
the current market conditions with “a strong balance sheet”.
The bank has largely escaped the subprime debacle that has
seriously impacted on its big private banking rivals, such as UBS,
Citigroup and Merrill Lynch.
UBS big brother
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By GlobalDataUBS historically has been significantly larger than Credit Suisse
in terms of wealth management clout. At the start of 2007, UBS had
about $1.6 trillion of private banking client assets under
management versus just under $1 trillion for Credit Suisse.
But the problems of UBS, along with other troubled private banks
such as Merrill Lynch and Citigroup, give players such as Credit
Suisse a fighting chance of closing on these companies and appear
to be giving smaller, boutique banks in Geneva and other centres
new impetus (see
Geneva private banking boutiques are back).
Some bankers even contend that private banks unaffected by the
subprime debacle can use their healthy balance-sheets as a
competitive weapon to overhaul their crisis-hit rivals. Companies
such as JPMorgan and Northern Trust in the US and Credit Suisse,
Deutsche Bank and BNP Paribas in Europe could win a significant
competitive edge over rivals such as Citigroup.
At Royal Bank of Canada, Michael Lagopoulos, the chief executive
and global head of international wealth management, has declared
that institutions that “have not been wounded by the subprime
crisis will have a temporary advantage that we will try to work
aggressively”.
At brokerage Keefe, Bruyette & Wood, analyst Matthew Clark says
that he remains concerned that “staff morale, client concerns and
disruption from management changes and balance-sheet restructuring
could have materially damaged the UBS franchise”. The trend is
likely to accelerate in February after the bonus season, but the
high number of new advisers hired last year – an increase of 887,
or 19 percent – will mitigate the impact, Clark suggested.
Worldwide growth
The Credit Suisse expansion programme involves worldwide growth,
with focus on Europe, Latin America, India, Japan, the US and the
Middle East. This includes building a comprehensive wealth
management operation in the US, establishing an onshore presence in
Japan in 2008 and entering the onshore markets in Mexico and
Brazil.
Credit Suisse, which has about 600,000 wealth management clients,
is also aiming to promote private banking as a bigger, more stable
source of revenues at a time of a likely downturn in the investment
banking business.
However, word in informed circles in Zurich is that Credit Suisse
is also moving to re-energise its generation of net new money from
private clients in order to keep on the pace of rivals such as UBS,
reflecting its relatively poor performance in asset-gathering,
particularly in the key Asia-Pacific region.
In addition, concerns are growing that new money inflows into both
Credit Suisse and UBS could be slashed in half this coming year by
the volatility triggered by the credit crisis.
At Bear Stearns, analyst Christopher Wheeler contends that net new
money as a percentage of invested assets could halve at UBS and
Credit Suisse in 2008 compared to 2007 because of factors such as
the credit crisis. Both banks may have to be content with wealth
earnings for 2008 staying at around last year’s levels, after
persistently rapid growth since the bull market in financial
markets started in 2003.
