PwC Warns Of Continuing Private Banking Slowdown

by Carla Johnson, Investors Offshore.com

16 November 2001

An industry survey released by international consultancy firm PricewaterhouseCoopers on Wednesday painted a gloomy picture of the private banking industry.

According to PwC, the growth rate for the $27 trillion worldwide wealth management industry has crashed by more than half during this year's market downturn. PricewaterhouseCoopers said that it expected the growth rate to fall to 4% (from last year's estimated 9% growth) for offshore private banks, and to 6% for onshore business, compared to a more optimistic previous estimate of 14%.

However, the report's authors have stressed that they are not sounding the death knell for the wealth management industry, merely alerting it to the alarm bells which are starting to sound as the global economic situation worsens. 'Do we think the private banking industry will disappear?' asked Jeremy Scott, chairman of global financial services at PwC. 'No. The traditional private banks will continue, but they will have to bring their costs into better sync with their revenues given the reduced size of the total market.'

The survey shows that the mass affluent segment of the private banking market has been worst hit by the economic situation, due to lack of returns to justify large investments, and shrinking client numbers. Senior Partner Bruce Weatherill revealed Wednesday that within this sector: 'there are very, very few institutions that have actually made money from their investments.'

The PwC study also showed that an increasing number of private banking clients are unhappy with their bank, with around 22% expressing dissatisfaction, and 43% actively wanting to switch banks. The survey's authors predicted that private banks have a tough time ahead of them, and will need to work hard to get ahead of the game if they are to survive the ongoing lean period.

They warned that: 'Customer loyalty will be stretched thinner by the arrival of new players, growth will be harder to deliver in a tougher financial environment and client demands will become more exhaustive.'

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