Swiss private bank Pictet's profits were hit by lackluster markets and a staff ramp-up last year. As rivals seek to build up future revenue streams with technology initiatives, there is little sign that the Geneva-based bank is pouring resources into a digitization push.
Family-controlled Pictet, Switzerland's largest private bank after UBS and Credit Suisse, is a figurehead for Swiss banking. All the more surprising that the partner-run bank recorded another fall in profits last year – and not a minor one.
The bank's net profit dropped 7 percent to 422 million Swiss francs, Pictet said on Wednesday based on audited figures. Operating income rose marginally – 2 percent – to 2.177 billion francs.
It is the second consecutive fall in profits at Pictet, which didn't disclose a specific reason for the drop in a brief statement.
«Robust New Money»
A hiring spree hit Pictet's profitability: the bank added roughly 200 new private bankers last year, a spokesman told finews.com. Pictet now employs just over 4,000 people.
Pictet added 25 billion francs to its assets under management or custody on the year, which stood at 462 billion francs at year-end. Nearly half – 12.4 billion francs – of the rise was a result of net new money, which slipped from the 14.6 billion francs won in the prior year.
«We showed robust net new money in both our wealth management and asset management divisions last year. We have a very strong competitive position in an environment which remains challenging,» senior partner Nicolas Pictet (pictured above) said in a statement.
Thinner Capital Cushion
The private bank's Tier 1 capital cushion was 2o.4 percent at year-end, based on core capital of 2.16 billion francs and a liquidity coverage ratio of 166 percent.
This is slightly lower than one year ago, when the cushion was 22.1 percent and the coverage ratio was 195 percent.
To be sure, Pictet is still flying well above Basel regulation, which require an at least 4.5 percent cushion and a minimum ratio of 11 percent. Swiss regulation requires a capital ratio of at least 7.8 percent.
Hometown Rival Race
Pictet's hometown rival, Lombard Odier, is suffering a similar fate. While that bank was able to maintain profits in 2015, it suffered a double-digit setback in the first-half of 2016, as finews.ch reported (article in German).
Unlike Pictet, Lombard Odier has an ace up its sleeve which is beginning to contribute to profits. The bank, also headquartered in Geneva and run by descendants of the founding families, has built up a technology platform which offers in-house portfolio management and other services such as custody and reporting to third parties.
The area has been surprisingly lucrative for Lombard Odier: assets managed in this business rose by 4 billion francs in the first-half of last year, to 63 billion.
Pictet has been slow to push into technology and digitization, but announced last year that it will equip its Swiss private bankers with an app that colleagues in Asia already have. The bank's advisors will be able to track markets and portfolios as well as exchange information internally.
