European wealth managers are battling it out in Asia but North America is where private banking revenues are.
This year’s global wealth report from Boston Consulting Group is exactly the kind of news that the heads of most global wealth managers don’t want to hear. In 2021, BCG predicts that North America will continue to be the region with the largest amount of private wealth – $73 trillion, up from $55 trillion now. Asia, while growing by $5 trillion, will total only $61.6 trillion.
Not only is it bigger, but it seems North America is also the highest revenue-producing region for private banks. Last year, the revenue pool was $88 billion, compared with just $19 billion in Asia. And when it comes to profits, North American private banking also wins. Last year, pre-tax profit margins were 22% in North America versus 20% in Asia.
Why don’t most managers want to hear it? Because if they are European, the chances are they are not really in North America. Most of them are battling it out instead, with varying degrees of success, in Asia.
This makes UBS something of an anomaly and, in part, speaks to why the US wealth management business is pulling in record net new assets. Despite the odds (and tax evasion scandals), the Swiss bank hung on in the US while its closest European competitors, Credit Suisse and Deutsche Bank, scaled back.
It was the right thing to do. Now UBS finds itself competing only with the regular Wall Street names, against whom it can stand out as the Swiss, global foreign bank. UBS can also tout itself as the biggest wealth manager in Asia for global clients. The Swiss bank is almost in a better position to win wallet share in the US than the large local banks, who have failed to differentiate themselves other than by model so far.
The European banks that have put all their global eggs into Asia’s basket now find themselves in a corner. They have to make Asia work. Deutsche Bank is the latest to say it will be hiring client managers in the region. Julius Baer is also aggressively expanding in Asia. Credit Suisse has relationship manager hiring targets that it has not yet reached, while BNP Paribas recently got a new CEO for its Asian wealth business – presumably with its eye on growth.
The US banks can afford to move slowly in Asia (and they are); other than UBS, the European banks cannot.