Rivals are lining up to get a piece of the wealth management pie from UBS. The government-backed takeover of Credit Suisse should, on paper, allow Switzerland’s largest bank to increase the wealth of its wealthy clients to $3.4 trillion (€3.1 trillion). But the new boss, Sergio Ermotti, should plan for a much smaller amount.
Credit Suisse saw CHF 110,000 million (€112,000 million) walk out the door in the fourth quarter of 2022. This represents 8% of its assets under management. But a similar amount could have evaporated in the run-up to the March 19 emergency bailout, estimates Vontobel analyst Andreas Vendetti. Economics Minister Karin Keller-Sutter said on March 25 that the bank withdrew “a significant amount of $1 billion” from the central bank over the weekend before the bailout. It was necessary, he said, because Credit Suisse’s customers had once again withdrawn money, and the figure exceeded CHF50 billion.
These outflows were mainly due to cash from wealthy clients and some deposits from the Swiss banking unit of Credit Suisse. Part of it went to local cantonal banks, which have a state guarantee for all customer deposits, above the CHF100,000 limit for national bank accounts. Zürcher Kantonalbank, the largest of these lenders, recorded CHF 34 billion in net new inflows in 2022, up 31% from the previous year. Some of the hot money has also gone to Credit Suisse’s foreign competitors, particularly from Singapore and Dubai, according to dozens of senior private bankers.
Other assets are likely to corrode. High net worth individuals often have multiple banking relationships. Those with accounts at both Credit Suisse and UBS may not like the excessive concentration of wealth. So they will try to transfer their stakes to competitors like Julius Baer and Pictet, to smaller private Swiss banks, or even to foreign entities like Morgan Stanley or Deutsche Bank. Shares of Julius Baer, soon to be Switzerland’s second-richest bank with CHF424 billion in assets under management at the end of 2022, are up 14% this year, after surging earlier in the year on anticipation of more tickets.
Another drain on clients from wealthy clients pursuing private bankers will come from the new UBS. The bank’s rivals see a once-in-a-lifetime opportunity to lure talented relationship managers from major Swiss banks, say executives at some of UBS’s rivals. Even the most loyal employees are tested by reality, says a senior manager at a bank in Zurich.
These changes will not happen overnight. Bankers may need months to turn companies around. Transferring clients also requires vetting of funds. While accepting a new, wealthy Swiss client may take just a week, doing so in Singapore takes more than 30 days. Credit Suisse has little incentive to quickly transfer value.
Finally, the stain of bailing out a second Swiss bank 15 years after the 2008 UBS crisis is an open network of rival financial centres. Hong Kong, which holds $2.3tn in foreign assets, could pass $2.5tn in Switzerland this year: It would only take a 10% annual increase in cross-border wealth, we calculate using data from the Boston Consulting Group. Singapore, with 1.5 trillion, could roughly match Switzerland in 2026.
Even if the turnaround is slower, the new Swiss banking giant has plenty of motive to contend with.
Meanwhile, wealthy Asians are rushing to put their money in Singapore. Among its attractions are political stability and a strong rule of law. Its relative neutrality between the US and China, along with Western banking crises, favors it, as investors prioritize the safety of their money over financial profitability. Wealth managers estimate that Singapore had 1,400 family offices at the end of 2022, up from about 400 in 2020.
By some metrics, there’s still room for growth. Singapore had about $793 billion in wealth assets at the end of 2020, less than a third of that of Switzerland and less than the United Kingdom, the United States and Hong Kong, according to Deloitte. Its double-digit growth has outpaced that of Switzerland and Hong Kong. This issue focuses on assets managed or managed somewhere other than the owner’s residence. There is also less risk of a banking tragedy: banks’ assets in Singapore are 2.8 times their GDP, compared to more than 5 in the case of Switzerland.
However, he has come a long way in other ways. Last week, a private banking group backed by the Monetary Authority of Singapore rejected reports that the central bank had directed financial institutions to remain silent about the origins of wealth flows. He said the sources of global inflows remain diversified, disliking comments focused on money from China. Singapore does not want to be seen as taking advantage of the ills of its largest trading partner.
The other problem is that the wealthy are also flocking to the city, both with family offices and international companies looking to Singapore for a base in Asia. The non-resident population has fallen 7% since 2019, and wealthy expats have become easy scapegoats for soaring rents and soaring car prices.
The authorities are trying to be a bit selective, setting minimum assets and business spending for family offices and requiring them to create jobs; The backlog of orders also indicates a degree of official caution. City financiers seek to distinguish themselves from the quality of money flowing into Dubai, which is popular with Russians.
The wealth management sector in Singapore is booming, but it has significant growth problems.
Authors columnists for Reuters. The opinions are yours. translation Carlos Gomez DownWell, it’s a responsibility five days
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