UBS continues to dominate, but SG is making impressive strides in private banking
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Since winning the award for best global private bank in 2004 UBS has made four acquisitions, deepening its footprint in the US, Latin America, Luxembourg and Germany. And it is unlikely that the firm’s buying spree will cease there. UBS, it seems, has made its mission the global domination of private banking. Expansion does not come cheap, but UBS is convinced that it will be an investment. So far it seems to be paying off. First-quarter pre-tax profit this year was the best yet at SFr915 million ($720 million).
Good service
The figures are impressive, and so is UBS’s reputation for good service and performance as evidenced by the results of Euromoney’s 2005 private banking survey.
This high level of service has enabled UBS to both attract and retain clients. The firm is now responsible for approximately 3.5 million individual client accounts, and has SFr140 billion in assets invested with it. In 2004 UBS attracted net new money of SFr59.4 billion, and in the first quarter of this year it attracted a further SFr15.4 billion – its second best inflow number ever.
It’s all the more impressive that UBS is so clearly ahead of the pack when one considers the bank only set up a wealth management business in Europe in 2001. UBS is starting to expand its business in Asia, the fastest-growing market for wealth management in the world. It has offices in Beijing and Kuala Lumpur for the first time, and has re-entered the Japanese market.
UBS is once again a deserving winner of the best private bank award.
But it is difficult to ignore the rapidly growing success of SG Private Banking. The decisions SG has made in terms of product selection and geographical expansion have been well timed and well placed, and it is reaping the rewards in terms of profitability. In the first quarter of this year, SG Private Bank enjoyed the best quarter ever, with a gross margin of more than 100 basis points and operating income of €41 million. Its assets under management are now €51.3 billion, compared with €45.1 billion at the end of 2003.
SG certainly owes much of its success to timing. The market downturn brought structured products and alternative investments to the attention of high net-worth individuals, and SG was ready to lead the field in those offerings. “We were able to replace commission on equity market products with alternatives and structured products, and now with markets recovering we have been able to increase profits substantially,” says Stephane Hild, commercial director for SG Private Banking Worldwide.
Although the bank adheres to an open architecture policy, its in-house expertise in equity derivatives is hard to rival. In Euromoney’s 2005 global private banking survey, SG was voted best global provider of structured products. Says Seb Dovey, managing director of Scorpio Partnership, consultant to wealth managers: “SG has the potential now to become a major challenger in wealth management, having developed a strong proposition in popular structured product solutions in the past decade.”
Geographically, the bank’s expansion plans have been carefully thought through, with both organic growth and selective acquisitions. Growth in the number of staff has increased by more than 8% over the past 12 months. “We don’t try to overstretch ourselves, and have focused on countries only where there is growth and where we can make a difference,” says Hild. One region missing from SG’s repertoire is the US. “We are aware of the growth of the US market, and don’t discount it as a future focus, but at this stage we don’t have the weight to make a difference there.”
In Asia
Where the bank is undoubtedly making a difference is in the growing market of Asia. “We took a chance by establishing ourselves in Asia at the time of the Asian crisis, but we were proved to be right,” says Hild. Starting in Hong Kong and Singapore, SG then broached the difficult market of Japan through the acquisition of the Chase Trust Company.
Although other private banks have struggled to make an impact in the world’s second-largest savings market, SG is making solid progress. “The private-banking market there is not very developed, but in three years we’ve been developing well in terms of growth of assets under management and expect to break even very soon.”
