UBS and Credit Suisse lead Europe’s banks

Roxane McMeeken reports on the findings of Merrill Lynch’s latest research into the private banking market. UBS and Credit Suisse are Europe’s strongest private banks, according to the latest fundamental equity research from Merrill Lynch. Both have delivered much-improved first quarter results. Jacques-Henri Gaulard, analyst and author of a new report on private banking, said UBS was likely to benefit from its “all encompassing strategy”. The bank’s trump cards include the fact it has the “the best offshore franchise”, a firm foothold in the US market thanks to subsidiary PaineWebber, and an “astute development strategy in onshore Europe,” said Mr Gaulard. Credit Suisse, meanwhile, stands to benefit from its “more aggressive management, strong product innovation and a European presence now fully refocused on pure private banking”. Merrill has branded the shares of both banks a “buy”. This is based on an analysis of Europe’s private banking industry that has concluded that those players which combine onshore and offshore operations have the edge over those that focus on one or the other. Mr Gaulard said: “Diversified players benefit from the higher and more stable margins of the offshore market, while they can secure good asset growth thanks to their onshore exposure. Pure players will likely face margin or growth pressure.” The report added that Europe’s private banking market is now mature. The worldwide high net worth (HNW) market is currently worth around E24,000bn, with Europe accounting for one third. The US has a smaller portion – one quarter, according to Merrill. Contrary to common perception, Merrill’s analysts believe that offshore assets will continue to represent a significant chunk of the HNW market. They expect the figure to be 31 per cent globally in 2005. Mr Gaulard said: “As long as there is economic and political uncertainty worldwide, the offshore market will continue to thrive.” Merrill expects the global HNW market to grow by 6 per cent over the next five years. However, the analysts are more cautious about the shorter term, predicting a three-year growth rate of 4.4 per cent.