Private Banks Suffering As Market Slump Continues

by Caroline Maxwell, Investors Offshore.com

09 July 2001

In a year which has seen many of the newer players in the global financial services sector go to the wall due to bearish conditions and nervous investors, the cry of 'Recession? What recession?' has been heard on numerous occasions from the private banking industry, which has been cashing in on the move away from DIY investment towards asset management, and has been happily nurturing investors with burnt fingers.

However, after nearly a year of market slumps, it seems that even they might be beginning to suffer. Analysts expect that the majority of big expansion plans in the wealth management industry are likely to be shelved, and technology budgets significantly trimmed in order to cut costs as profits slump. In addition to the unfavourable market conditions, the global private banking industry is also suffering as a result of the rash of new players who decided to jump on the asset management bandwagon earlier this year. The shift in focus to wealthy individuals in order to compensate for the slump in institutional business has not helped matters either.

Ian Woodhouse, a partner with PricewaterhouseCoopers predicts that the outlook is gloomy for the $25 trillion industry if the markets do not pick up soon: 'Quite a few people have been knocking on our doors lately thinking of selling out,' he said. 'If current market conditions continue, we may see these one third of the banks that are weak selling out.'

Although the industry has largely escaped the large scale layoffs that have affected the investment banking and online contingents, Wall Street behemoth Merrill Lynch has been forced to cut 9% of its private banking jobs in Europe, the Middle East, and Africa, and others have announced hiring freezes.

Adam Green, head of the UK Private Banking Unit at international executive search firm TMP Worlwide summed up the situation last week: 'The end game is going to be played by those players who are really committed to the business and who have deep pockets,' he observed.

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