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Banks including UBS and Vontobel see a lot of potential in offshore banking with rich U.S. clients. The business has never been tougher though, research by finews.com reveals.

«We are able to offer our clients something very special, and that’s why we are able to win the battle of David against Goliath.» These were the words of UBS CEO Sergio Ermotti.

«The appetite to invest abroad is decreasing among clients,» said Eric Syz, head of Bank Syz in Geneva. Two bankers with contradicting views on the same market. Syz and Ermotti were talking about offshore banking with rich Americans.

Who's Right?

The fact that two seasoned bankers hold so starkly opposing opinions about one and the same market is probably a sign of the times. In Switzerland, relationship managers specialized in the U.S. market are moving from bank to bank at an ever faster pace, while banks are either adding entire teams or getting rid of their portfolios – as happened recently when Vontobel acquired the U.S. client book of Lombard Odier.

The question is whether the U.S. business is a veritable bonanza or more or less a shelf-warmer. Who’s right – Syz or Ermotti?

Seriously Sensitive

A quick look back: when U.S. investigators started targeting the Swiss big bank UBS in 2008 for illegally abetting tax evasion, the offshore business with clients based in the U.S. became a seriously sensitive one for Swiss banks. While Wegelin or Bank Frey were swept away by the scandal that broke, other banks quickly adopted a less risky white-money strategy. They founded SEC-licensed units to manage U.S. assets in Switzerland in keeping with U.S. tax laws.

At that time, says a banker familiar with the business, Swiss companies had about 20 billion Swiss francs ($20 billion) in assets belonging to U.S. clients. Ten years later, more than 40 licensed companies are competing for roughly the same amount of money. «This,» he said, «isn’t what I would call a growth market.»

Hard to Gain Access

The reasons why the assets have remained roughly unchanged over many years are to be found in the idiosyncrasies of the business. Observers say that it has become exceedingly tough to make rich Americans move assets to Switzerland after the end of the hide-and-seek with the U.S. taxman.

Even more so because Swiss bankers in general find it hard to gain access to the wealthy Americans. They have to take the detour via tax lawyers and fiduciaries.