Private Banking Profits Continue To Grow

by Phillip Morton, Investors Offshore.com

17 June 2005

The global private banking industry’s pre-tax profit levels have continued to drive forward with an average increase of 23.8% in USD terms, according to the latest 2004 Private Banking Benchmark study by leading wealth management consultancy Scorpio Partnership.

The strong results for the industry were supported by an industry-wide 13.1% increase in assets under management (in USD terms) for the 12-month period under review. Further, net new money tracking data leapt 61.6% ($41.53 billion) among institutions reviewed in 2004 compared with 2003 data.

Overall, private banks reviewed for the Benchmark now manage in excess of $6.0 trillion in fee-based assets for high-net-worth individuals worldwide.

Scorpio Partnership’s groundbreaking market analysis confirms that the industry is now enjoying a turnaround in fortunes after a prolonged period of relatively flat performance. Strong profit figures are partly due to the results of internal operations restructuring at many institutions as well as continued cost cutting measures now resulting in improved bottom-line performance. This has also been complemented by an improvement in global markets which has encouraged clients to gradually reinvest assets through private banks.

“The private banking industry is firmly back on its feet for the first time this decade," observed Sebastian Dovey, managing partner of Scorpio Partnership.

"The figures indicate that re-positioning at many firms is now feeding through to the bottom line and confirm some of the trends first revealed in the half-year results report released in December. Sensible business models combined with a greater emphasis on upgrading the front office to secure high quality assets should mean, markets permitting, that this time the trajectory will be sustainable,” Mr Dovey added.

Among the top 10 global private banking institutions, UBS retained pole position with $1,295 trillion while Merrill Lynch broke into the trillion dollar club with $1,030 trillion in fee-based assets under management.

Moving up the charts to fourth position was JPMorgan Private Bank, whilst ABN AMRO jumped one position to ninth.

Banks staying in the same position, although experiencing an increase in assets under management were UBS, Credit Suisse, Citigroup Private Bank and Dresdner Bank. Sliding down the rankings were Deutsche Bank which dropped one place and HSBC Private Bank which dropped two.

The new top 10 entrant this year was Wachovia Wealth Management with $147 billion. There are now 16 institutions with over $100 billion in fee-based assets under management, compared with 13 for the previous year.

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