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Bank ills visited on wealth managers

Investment banks affected by the subprime crisis are facing substantial reorganisation, and in some cases, divestment of some of their businesses. Capco consultants Richard Watrasiewicz and Mark Jenkinson examine how, for example, a wealth management entity might have to be hived off from an investment bank parent

This article appears courtesy of Global Investor.

Global wealth has increased substantially in recent years and, as a result, wealth management has become a significant area of interest and focus for banks. Major institutions are investing in global and regional growth programmes to capture a greater share of this growing business.

Critically for banks, as a consequence of the credit crunch, the revenue stream generated by wealth management arms is becoming more vital than ever. However, as poor performance of firms' investment banking businesses becomes apparent, there is greater pressure on the wealth management units of those firms.

A number of the world's largest wealth managers, including those owned by Citigroup, Merrill Lynch, HSBC and Morgan Stanley, have been affected as a result of belonging to institutions that have experienced write-downs.

A case in point is UBS. Although UBS Wealth Management was this year voted the best global private bank in Euromoney's poll for the fifth consecutive year, there are increasing concerns that its reputation may have been dented by the losses its investment banking division has suffered.

As UBS's chief executive, Marcel Rohner, commented (whilst announcing that the bank would be selling a stake in itself to investors in Singapore and the Middle East), "An investment bank can and will incur losses...but

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