Efficiency gains fatten up private banks’ bottom line
Scorpio Partnership puts 47 per cent rise in pre-tax profits of top global wealth management institutions down to new client growth. Paula Garrido reports
Private banking profits continue to rise as a consequence of more assets under management and a more efficient business structure.
According to a survey by Scorpio Partnership, the average increase in pre-tax profits for the largest global wealth management institutions was 46.7 per cent during the first half of the year.
During this period, the most profitable private banks were UBS, Credit Suisse, Merrill Lynch, Citigroup and the Royal Bank of Scotland (RBS), with an average increase in pre-tax profits of 40.44 per cent.
“In May we saw increased assets under management but there wasn’t an increase in profits and we expected that to come through now,” said Scorpio’s managing director Sebastian Dovey. “One of the areas where banks have become more efficient is the asset management function, and going into open architecture has allowed them to either retain or increase the margins and win new clients.
“They have a stronger proposition now to say to investors they are looking at the whole of the market which they didn’t do before.”
This, combined with better mid and back office processes, is allowing banks to provide clients with better solutions for their investment needs.
In terms of new assets under management, UBS managed to attract the largest amount of new money in the first six months, representing $23bn (E17.7bn). The bank remains the world’s largest wealth management organisation with more than $1100bn under management.
There are two new entries in the top 10 ranking by assets under management: Wachovia Corporation, in fourth position, and the Bank of America as number six. This is the first time these institutions provided relevant data, in line with the trend towards greater transparency in the industry.
