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March 19, 2009updated 04 Apr 2017 3:56pm

Top 10 lost $2trn AuM in 2008

The worlds 10 largest wealth managers lost $2.19 trillion in assets under management in 2008, equivalent to a 24.6 percent decline in total AuM.

By PBI Editorial

The world’s 10 largest wealth managers lost $2.19 trillion in assets under management in 2008, equivalent to a 24.6 percent decline in total AuM.

Private Banker International research from the companies’ most recent regulatory filings shows the extent of the damage from declining investment markets, particularly in the second half of last year. It also shows a significant reshuffle in the wealth management hierarchy, driven by mergers and acquisitions, client preferences and, in some cases, fluctuations in exchange rates.

The most significant and controversial wealth management merger of the year, the Bank of America/Merrill Lynch deal, has dislodged UBS as the global leader in wealth management. It has created a wealth management Goliath, with 24,516 brokers and advisers and a combined 2008 pre-tax profit of $4.6 billion. Yet, despite its vast potential, Bank of America management and shareholders will find it hard to get excited about an acquiree which, on a group level, endured $15.3 billion of losses in the fourth quarter of last year alone, mainly a result of losses in its Global Markets and Investment Banking unit.

Citigroup, which had been the second largest wealth manager in 2007, drops to third in 2008. If its Smith Barney brokerage – in which it sold a 51 percent stake to Morgan Stanley in January this year – is taken out of the equation, Citi Private Bank falls to sixth, just behind HSBC. PBI estimates the combined Morgan Stanley-Smith Barney business, which is due to complete in the third quarter, would have ranked third in the end-year 2008 rankings, taking into account fourth quarter declines in AuM, with around $1.4 trillion.

Citi’s move to downsize its wealth business was necessary to strengthen the bank’s Tier-1 capital, but may have other benefits. Its private bank should be able to focus more on serving the needs of its ultra high net worth and “mega wealth” clients (see PBI 240).

Among the top performers, JP Morgan’s AuM declined just $3 billion, or 1.2 percent, mainly because of acquisitions over the course of the year, the most significant of which in terms of wealth management was Bear Stearns.

Barclays slipped out of the top 10 to 12th, despite its $250 million acquisition of Lehman Brothers’ North American investment banking and capital markets operations, and an increase in assets under management of 9.5 percent in domestic currency. This was a result of the considerable weakening of sterling during 2008. At constant, 2007 exchange rates, it ranked as the eighth largest global wealth manager by AuM.

BNP Paribas, whose assets under management declined 12.2 percent in euro terms, is also set to be boosted by the acquisition of a much-weakened Fortis, taking it to seventh from ninth in the rankings. PBI calculates Fortis will bring €43 billion ($60 billion) in new private banking assets to the franchise, making the combined entity the biggest in the eurozone.

Taken as a single entity, Bank of America/Merrill suffered the largest decline in AuM, down $624 billion or 26.1 percent, mainly a result of a $504 billion 2008 decline at Merrill. It was closely followed by UBS, whose ‘invested assets’, the term used to measure its business performance, were down $533 billion, also 26.1 percent. Aside from assets under management, net inflows or outflows of client money are considered to be another strong indicator of sentiment towards private banking brands and business models.

Efficiency. Cost-income ratios - selected wealth managers (wealth management divisions)The best performer for whom information was available among the top 10 was BNP Paribas. Excluding its acquisition of Fortis, net new money was equivalent to 7.8 percent of its year-end 2007 assets. Other strong performers were Deutsche Bank, with inflows equivalent to 6.7 percent of its client asset base and Credit Suisse, with inflows of 5 percent end-2007 AuM.

Morgan Stanley’s relatively poor AuM performance, a decline of 27.9 percent, is explained by the sale of its Spanish business, with an estimated $10 billion in client assets, in early 2008. Over the year, it had net inflows of 4.8 percent, which came predominantly from its US branch system.

It was also a significant year for staffing levels for advisers and brokers at the largest wealth management firms, where employee numbers fell by 3.5 percent. Seven of the 10 businesses ranked in the PBI top 10 gave figures for the number of advisers or brokers on their books. At the end of 2007 there were 69,406 of these employees, down to 66,953 by the end of 2008.

Note: Exchange rates used in this article relate to exchange rates at 1 January 2009, in line with the figures used with the survey data.

PBI GLOBAL Top 10

Top 10 wealth managers – global

2007 rank

2008 rank

Bank

2007 AuM ($bn)

2008 AuM ($bn)

Change ($bn)

Change (%)

6

1

Bank of America/Merrill(1)

2,395

1,771

-624

-26.05

1

2

UBS

2,040

1,507

-533

-26.13

2

3

Citigroup

1,784

1,320

-464

-26.01

3

n/m

Merrill Lynch(2)

1,751

1,247

-504

-28.78

4

4

Credit Suisse

745

609

-136

-18.26

6

n/m

Bank of America 2)

644

524

-120

-18.63

5

5

Morgan Stanley(3)

724

532

-202

-27.90

7

6

HSBC

421

352

-69

-16.39

9

7

BNP Paribas/Fortis(4)

400

293

-107

-26.75

11

8

JP Morgan

261

258

-3

-1.15

9

n/m

BNP Paribas (2)

278

233

-45

-16.19

8

9

Deutsche Bank

285

230

-55

-19.30

13

10

Goldman Sachs

219

215

-4

-1.8

 

Totals

9,274

7,087

-2,187

-23.58

n/m= not meaningful; (1) formed by merger of Bank of America and Merrill on 1 January 2009; (2) not included in totals to avoid double counting; (3) adjusted for sale of Spanish business ; (4) acquisition pending shareholder vote in April Source: PBI

GLOBAL WEALTH

Top 10 wealth managers – at 2007, constant exchange rates

2007 rank

2008 rank

Bank

2007 AuM ($bn)

2008 AuM ($bn)

Change ($bn)

Change (%)

6

1

Bank of America/Merrill(1)

2,395

1,771

-624

-26.05

1

2

UBS

2,040

1,419

-621

-30.44

2

3

Citigroup

1,784

1,320

-464

-26.01

3

n/m

Merrill Lynch(2)

1,751

1,247

-504

-28.78

4

4

Credit Suisse

745

573

-172

-23.09

6

n/m

Bank of America (2)

644

524

-120

-18.63

5

5

Morgan Stanley(3)

724

532

-192

-26.52

7

6

HSBC

421

352

-69

-16.39

9

7

BNP Paribas/Fortis(4)

400

307

-93

-23.25

10

8

Barclays

265

290

25

9.43

11

9

JP Morgan

261

258

-3

-1.15

9

n/m

BNP Paribas (2)

278

244

-34

-12.23

8

10

Deutsche Bank

285

241

-44

-15.44

 

Totals

9,320

7,063

-2257

-24.22

n/m=not meaningful; (1) formed by merger of Bank of America and Merrill on 1 January 2009; (2) not included in totals to avoid double counting; (3) adjusted for sale of Spanish business; (4) acquisition pending shareholder vote in April. Source: PBI

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