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 McKinsey’s 2007 European private banking survey.
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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 continent’s
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 rest’
Greater 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.
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By GlobalDataStill, the private banking market overall continued to flourish in
Europe last year. Assets under management grew by 14 percent.
Profit margins, in contrast, were fairly stable at 35 basis points,
in line with the average of the last four years.
Although the European private banking profit pool has more than
doubled since 2002, McKinsey thinks the market still shows
significant potential for growth.
“Far from fearing market saturation we see significant unmet
demand,” it says. “Private banks today capture only half the
onshore financial assets held by HNW individuals, according to our
estimates.”
