On average, Swiss banks need to increase their assets two-fold, according to a study by KPMG, a leading advisor for tax, audit and advisory services, writes Patrick Brusnahan.
According to the survey of 39 banks, many private banks need to grow significantly, otherwise the value of Switzerland’s private banking chains will disintegrate. Two-thirds of those surveyed expect their survival to depend on assets doubling, growing beyond a minimum of 10 billion Swiss francs, to cope with new and more complex requirements from clients and regulators.
In addition, most private bankers can expect stagnating and decreasing pay as more than 40% of responses predicted employee compensation to drop by at least 15% by 2022. Only 9% expected an increase in comparison to today’s levels.
Swiss wealth managers are expecting deals to increase assets to come shortly after ‘several years’ of pressure. Julius Baer Group Ltd. (BAER), have already acquired Bank of America Corp.’s non-US Merrill Lynch wealth businesses and Union Bancaire Privee, based in Geneva, have absorbed the Swiss units of Lloyds Banking Group and ABN AMRO in the last two years.
However, smaller private banking firms need to focus on consolidation though cost structure, more advanced technology and an increase in partnerships with other managers if they are to survive upcoming increases in expenses.
In their statement, KPMG said: "Many private banks need to grow substantially. Private Banks will need to compensate for low profitability through consolidation and the related economies of scale, through international expansion and through investment in technology."