June 24 (Bloomberg) -- UBS AG, the biggest money manager for the wealthy, and Merrill Lynch & Co., the third-largest, had slower growth in assets under management last year after losses tied to the U.S. subprime crisis, Scorpio Partnership said.

UBS's assets from affluent clients increased 8.8 percent to $1.9 trillion in 2007, compared with 13 percent growth the year before, said Scorpio, a London-based research firm, in an annual survey published today. Merrill's assets rose 8.3 percent to $1.31 trillion, slowing from 10 percent in 2006, Scorpio said.

Merrill, based in New York, had the biggest writedowns from the subprime crisis last year, amounting to $27.4 billion, while Zurich-based UBS had $19.1 billion of markdowns. Growth in private-banking assets at Credit Suisse Group AG, the No. 4 wealth manager, almost halved to 6.9 percent. The median increase for the global wealth management industry was 12 percent, down from 14 percent in 2006, even as some smaller banks benefited.

``A number of smaller independent banks have experienced very strong net inflows,'' said Ted Wilson, a senior consultant at Scorpio in London. ``There is a redistribution occurring between types of banks. The pure private-banking model may be the one people feel safest using.''

Pictet & Cie., Switzerland's largest closely-held private bank, boosted assets under management 30 percent last year to $120 billion, while Bank Sarasin, which is controlled by Rabobank Groep, had a 21 percent increase in assets to $40 billion, according to Scorpio.

`Reputational Damage'

``This sort of reputational damage hasn't happened to the market leaders before,'' Morgan Stanley analysts Huw van Steenis and Bruce Hamilton said in a note last week. They forecast ``anemic'' net new money at UBS this year and next and ``downward pressure on profitability from defending market share.''

The Swiss bank said today it agreed to buy VermoegensGroep, whose 38 employees manage 4 billion euros ($6.2 billion) in client money, to expand in the Netherlands. The bank's U.S. unit also said it hired Richard Gendelman and Christine McGinley from Citigroup's Smith Barney unit to join its Mount Laurel, New Jersey office.

UBS's wealth management units added a net 5.6 billion francs ($5.4 billion) in the first quarter, down from 31.5 billion francs in the fourth. Affluent clients may remove 10 billion francs from the bank in the second quarter, according to estimates from JPMorgan Chase & Co. analysts last week.

Asia-Pacific Growth

The U.S. Department of Justice is also investigating whether UBS may have helped clients evade American taxes. The bank has said that it's ``working diligently'' with both Swiss and U.S. authorities.

UBS rose 74 centimes, or 3.4 percent, to 22.8 francs in Zurich trading. The shares are down 51 percent this year, cutting the bank's market value to 66.9 billion francs. Merrill Lynch is down 35 percent this year.

New York-based Citigroup Inc., the second-biggest wealth manager, had 24 percent growth in assets to $1.78 trillion, the report said, following acquisitions such as Morgan Stanley's Quilter Holdings Ltd. BNP Paribas SA of Paris became the 10th biggest wealth manager in 2007 with 20 percent growth, benefiting from expansion in the Far East, Wilson said.

Asset growth last year was driven by greater investment from emerging markets and the Asia-Pacific countries in particular, as the region now accounts for 13 percent of the global total, almost double its share in 2006, the survey showed. Scorpio estimates that banks are competing for more than $9 trillion in still untapped assets from the world's millionaires.

Following is a table of the world's biggest wealth managers, based on 2007 data from Scorpio covering 211 private banks.

Rank   Firm               Assets under management      Percent
                            (billions of dollars)      change
                                                       (local
                                                       currency)

  1    UBS                                 1,896         8.77%
  2    Citigroup                           1,784        24.06%
  3    Merrill Lynch                       1,309         8.27%
  4    Credit Suisse                         745         6.94%
  5    JP Morgan                             545        17.20%
  6    Morgan Stanley                        522        18.10%
  7    HSBC                                  494        21.08%
  8    Deutsche Bank                         286         2.65%
  9    Wachovia                              285        38.35%
 10    BNP Paribas                           231        19.85%

To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

Last Updated: June 24, 2008 12:34 EDT