Bigger is better as behemoths bag Far Eastern billionaires

Size may not count for everything, but it certainly does in the world of wealth management. Year-end results for 2005 indicate that Switzerland’s top two banks, UBS and Credit Suisse, are in a superpower private banking bracket that is miles larger than anything else on the planet apart from Merrill Lynch. Net new monies at UBS were SFr95bn (?60bn) – nearly the entire assets under management of the top Swiss Partnership bank, Pictet. And at Credit Suisse, net inflows were a very respectable Sfr42.7bn, an amount of assets that would place a bank well within the mid-tier of the organisations ranked in the Scorpio Partnership Private Banking Benchmark. The reason that bigger is better is that revenues are a direct function of assets under management. The asset gathering circle then becomes virtuous, particularly in organisations with a firm hand on the cost control tiller, as higher revenues permit higher investments in new markets to dislodge more new assets. Both of the Swiss behemoths are reaping a rich harvest in the Far East, a market that is also fuelling the voracious expansion of European superpower pretenders such as BNP Paribas, which reported net new monies of ?10bn for private banking in 2005. The question on everyone’s lips is whether the new muscles being flexed by these private banking heavyweights are safe from atrophy. An element of caution is certainly required. The Far East is a green field site and client loyalty in the longer run remains to be tested, particularly when the markets head downhill. The omens are good, particularly for UBS, which claims already to have half the billionaires in Asia as clients. It is the other half of the billionaires that will make the difference to its competitors, however. Ted Wilson is a consultant at wealth management think tank, Scorpio Partnership