|© 2018 Euromoney|
|Use data from this survey|
Last year was another strong one for private banking and wealth management.
According to the Capgemini and RBC Wealth Management report, the number of high net-worth clients around the globe grew by 7.5% in 2017, while wealth grew in the segment by 8.2%. That means higher revenues for those that serve the wealthy. Indeed, the world’s largest wealth managers saw their revenues increase over the year.
Those revenues are not expected to decrease over 2018. Around 77% of respondents to Euromoney’s private banking survey, which was conducted in the last quarter of 2017, say they expect revenues to increase again this year. Less than 10% say they will be cutting costs.
Private bankers responding to Euromoney’s survey say they expect profits to be driven by new clients, greater client engagement and technology. In the latter sector, 55% of survey respondents say that the client user-experience is where their focus is. Cyber security is still low on their radar – only 7% say they are looking at this area.
Hiring is also expected to continue. Almost 60% of respondents say they will be increasing their number of financial advisers. That means the largest wealth managers will get larger still. UBS announced in January that it would be merging its Americas wealth management with its overall wealth management business to create a combined global division with $2.3 trillion in assets under management (AuM) – $1 trillion of which comes from ultra-high net-worth clients.
Mark Haefele, chief investment officer at the newly named UBS Global Wealth Management, says that scale is an advantage in the wealth management industry: “People will talk about niche specialists, but in wealth management, bigger should mean higher quality and better service.
"If that is not the case, then it’s not about the size, it’s about the leadership. It’s about using size to one’s advantage – such as being able to draw on the top funds and managers and partnering with other leaders.”
Clearly UBS group chief executive Sergio Ermotti is leading. During his earnings call in January, he said the move to merge the two units would “mean improved efficiency, more sharing of best practices” as well as “greater returns on its investments”.
Mark Haefele, UBS
He added that small acquisitions would be part of the overall expansion plan.
The wealth management group at UBS has always benefited from being the core business, whereas its banking peers are driven primarily by their consumer or investment banking arms. That commitment does not go unnoticed.
In Euromoney’s 2018 Private banking and wealth management survey, UBS remains the most highly regarded wealth manager worldwide. Not only does the firm top the rankings for the best global wealth manager overall, it is hard to find a global category that is not headed by UBS Wealth Management.
Underscoring the notion that it is difficult to tumble from the top, those in global second and third position in 2017 also retain their places this year. JPMorgan Private Bank ranks second. The bank also saw its assets increase 21% over 2017 and added 100 new wealth advisers.
Credit Suisse remains in third place and has had a successful couple of years since the development of its international wealth management business. Profitability has increased 40% for the first nine months of 2017 compared to the same period two years before, for example.
Chief executive Iqbal Khan says one of the biggest factors behind that profitability has been the productivity of relationship managers. In the first nine months of 2017, AuM per relationship manager had increased 17% and revenues by 12% compared with the same period in 2016.
Two new names enter the top 10 in the overall rankings this year, however. ABN Amro joins in 10th place, while Goldman Sachs moves into ninth, replacing Santander and Deutsche Bank respectively. HSBC also gains two positions globally, to rank eighth.
There are a handful of capabilities, however, where UBS, because of its focus on wealth management, cannot take on its peers.
HSBC, for example, ranks first globally for commercial banking capabilities for private clients – switching places with Citi. In investment banking, Goldman Sachs continues to be the global winner. And in asset management BlackRock returns to first position, forcing JPMorgan into second place.
Within asset management, survey respondents expect equity products to see the greatest appetite over the year ahead, with commodities the least.
In terms of regions, private bankers say that Asia will be the focus for investments over the year ahead. It is now the world’s largest high net-worth market, and competition in the region has been heating up. While Credit Suisse, Standard Chartered and JPMorgan have raised their minimum asset requirements, UBS, HSBC, BNP Paribas and DBS have been expanding in the sub-$5 million segment in order to grow assets.
Pictet is also expected to focus more on Asia with the hiring of Boris Collardi, Julius Baer’s former chief executive.
UBS, Credit Suisse and Citi retain their respective positions as first, second and third in Asia this year. China Merchants Bank (CMB), which ranks fourth, is joined in the top 10 by its domestic rival Agricultural Bank of China this year. The latter’s positioning is boosted by recognition of its strength in serving ultra-high net-worth clients in particular.
This year, Maybank joins the top 10 in Asia, as does BNP Paribas. Citi remains in first place for serving the super-affluent segment with $1 million to $5 million of assets. At a country level, Kotak Mahindra wins India this year, replacing IIFL Wealth Management, while CMB remains the leader in China.
In western Europe, the top 10 remain unchanged, although their positioning has been shuffled. UBS and JPMorgan retain first and second place respectively, while Pictet moves up to third place and Credit Suisse drops from third to fifth.
In individual countries, there were some new winners.
Pictet wins in Switzerland this year, knocking UBS down to second place. Despite its international accolades, Credit Suisse does not make the top five in its own country. Interestingly, UBS scores better in Germany, where this year it replaces Deutsche Bank as the overall country winner. The Swiss firm also beats the Dutch domestic banks to win first place in the Netherlands.
In France, BNP Paribas remains top, followed by Rothschild. CaixaBank wins in Spain once again. KBC moves up two places to take first place in Belgium this year. In the UK, JPMorgan was voted as best private bank overall, pushing UBS into second place. Santander ranks first in Portugal.
When it comes to revenue growth, it is not the traditional markets, or even Asia that private bankers say will lead the way in 2018. The most bullish private bankers are those in the Middle East, Africa and the Nordic and Baltic region.
The first two of these regions sees some big changes in the top-10 rankings this year.
For the Middle East region as a whole, JPMorgan Private Bank ranks first. Last year’s winner, Credit Suisse, drops to third place below UBS. Across the categories in the region there were some larger moves. Citi, for example, ranks fourth this year in the ultra-high net-worth category up from 10th last year. And Lombard Odier, which has been expanding its footprint in the region, moves from 14th to sixth place for overall services to clients with between $5 million and $30 million, and from 31st to sixth for super-affluent clients.
In Africa, some global names have moved into the overall top 10, forcing domestic players down or even out. UBS ranks first in Africa this year for overall private banking services, when last year it ranked just 11th. Also joining the top 10 on the continent this year are Julius Baer, JPMorgan, Credit Suisse and HBSC. Barclays takes the lead this year for serving clients in the super-affluent category – up from fourth last year. It also wins in Kenya and Ghana. Standard Bank wins in Nigeria, while Investec remains in first place in South Africa.
Nordea Private Bank tops the ranking in the Nordic and Baltic regions once again, while SEB moves into second place from third last year. NyKredit, a newcomer to the top 10 rankings, takes the honours in Denmark.
In central and eastern Europe, Raiffeisen falls from first place to sixth this year, allowing UBS to take the top spot. In line with JPMorgan’s international ambitions, the US bank moves from 17th in the region to fourth. Also entering the top 10 in the region are Garanti Bank, Yapi Kredi and Citi. Raiffeisen retained its first position, however, in serving the region’s super-affluent clients. And Credit Suisse continued its country wins by coming first in Russia.
The least bullish private bankers when it comes to expecting revenue growth are those in Latin America and North America, nevertheless 52% of bankers surveyed in both regions say they expect revenue increases.
In Latin America, there was little change in the overall rankings: JPMorgan retains its number one position, as it does in North America.
Pictet and Goldman Sachs enter the top 10 in Latin America. Credit Suisse moves from fourth to first for overall services for high net-worth clients in Latin America. Indeed, this client segment of $5 million to $30 million is seen to be the sweet spot for growth across the globe. Some 32% of private banks surveyed say this segment would be their focus over 2018. The next favourite category was the super-affluent.
Credit Suisse also wins in Brazil, moving Banco Itaú down to second place. Khan says there has been a shift at Credit Suisse over the last two years to give more responsibility and autonomy to each region, allowing them to respond faster to clients’ needs.
Santander replaces JPMorgan as winner in Mexico. Victor Matarranz, global head of Santander Wealth Management, says the bank has benefited from the strength of its retail bank in Mexico.
“We’ve been able to be close to our private clients,” he says, but adds that it has greater ambitions for its private banking franchise in the country.
In North America, Goldman Sachs is the biggest mover, from seventh to second place this year for private banking services overall. Drilling down into client segments, Merrill Lynch Wealth Management this year takes first place for high net-worth clients, pushing Morgan Stanley to second. RBC tops Canada and JPMorgan wins in the US.