Swiss private banks are in good shape and grew last year, but the averages only show half the picture as the gap between the high fliers and those mired in difficulties has opened up more than in previous years.
The coronavirus pandemic and its consequences for Swiss private banks accentuated existing trends in the sector in 2020, KPMG Financial Services Partner Christian Hintermann said at the presentation of the consultancy’s annual study on the state of the industry in Zurich Tuesday.
«The industry is drifting further apart and the differences are becoming more pronounced.» While the large banks with assets under management of over 25 billion Swiss francs ($27.3 billion) benefited most from the growth in net new money, the smaller banks mostly only pulled in a little or even lost assets.
Reputation as a Safe Haven
Market performance only played a very minor role here because the strong recovery in the second half of the year was just able to offset the slump in the spring. The bigger banks were generally ahead of the pack on customer acquisition too. «We have succeeded in gaining new customers and strengthening the offshore business in Switzerland.»
Hintermann put this down to the uncertainty caused by the pandemic and Switzerland's reputation as a «safe haven».
Strong Demand for Advice
Clients had great need of advice. The banks had laid the groundwork on this in recent years and had increased customer acquisition efforts, service and their range of products. «The big banks have been very successful, while the smaller ones have lost customer assets,» Hintermann said. However, size did not matter for some positive trends.
Efficiency measures have had an impact. Personnel cost margins have narrowed at most banks and assets under management per employee rose to a ten-year high.
Specialization, Niches
There were also successful exceptions at the small private banks. «These are often specialized banks with a focused customer base and range of products that are very successful in their niche.» There are positive examples of institutions that concentrate on Swiss customers or even certain regions, or those that are active in clearly defined foreign markets.
In general, however, it is more difficult for small private banks to defend their margins. Since 2010, the average margin has decreased by 27 basis points to 81 basis points, and by 7 basis points last year alone.
Only 90 Private Bank Next Year
This also explains the further consolidation. «If two banks, each with around 4 billion francs in managed assets, join forces, that doesn't solve their problem,» KPMG’s head of financial services Philip Rickert, said.
KPMG expects there to be only around 90 private banks in Switzerland by the middle of next year. Today there are 96 firms. Another problem for the smaller private banks is often the high average age of their customers. «When a change in generations is imminent, the bank is often unable to meet the needs of the new generation and the assets are withdrawn,» Rickert added.
- In the study, KPMG and the University of St. Gallen analyzed the state of the industry on the basis of data from 83 private banks. This covered around 84 percent of the sector. The big banks UBS and Credit Suisse as well as banks that had not published any figures for a long time were not included.
