July 10 (Bloomberg) -- Credit Suisse Group AG, Switzerland’s biggest bank by market value, is attracting new client funds and hiring experienced private bankers in Asia, even as the industry continues to grapple with a revenue slump.

“We are seeing a continuously positive trend in growing our franchise, as evidenced by the net new money that is flowing into the bank,” Marcel Kreis, head of private banking in the Asia-Pacific region at Credit Suisse, said in an interview. “We probably do take it from our competitors.”

The Zurich-based bank lured 2.6 billion Swiss francs ($2.4 billion) in net new money at its private banking business in the Asia-Pacific region in the first quarter, compared with inflows of 8.4 billion francs in all of 2008, it said. The global financial crisis slashed client assets in the wealth management industry worldwide by 17 percent to $14.5 trillion in 2008, according to London-based Scorpio Partnership Ltd.

The Asian wealth management industry is “not out of the woods yet,” Kreis, 57, said today. Clients are still showing a “heightened awareness of risk” and are demanding more transparency and understanding of their investments after suffering losses from the market turmoil, Kreis said.

The bank’s costs have become “a bigger focus” as clients still prefer to hold cash, he said.

“Cash is not an asset class that generates a lot of money for a bank,” Kreis, who is based in Singapore, said today.

Declining Profits

Private banks’ cost-to-income ratio, or expenses as a proportion of revenue, worsened to 72.4 percent worldwide last year, from 63.7 percent in 2007, according to Scorpio. Industry profits fell a median of 33 percent in 2008, the private bank and wealth consultant said.

The next 12 months will continue to be a “challenge” as investors continue to shun products that pay higher fees, said Stephen Wall, a London-based director at Scorpio.

“If banks can start to get their clients re-engaged in the investment process and therefore back into equities and some alternative such as structured products, that may have an impact, but I think it’s going to be a difficult year,” he said.

Assets under management at Credit Suisse’s private bank in the Asia-Pacific region stood at 53.4 billion francs in the first quarter, down from 68.4 billion francs at the end of 2007, according to the bank.

The private banking industry is likely to experience “consolidation” in the next 12 to 18 months, Kreis said.

‘Second Thoughts’

“Two years ago, everybody piled into this market, everybody piled into Asia, from boutique Swiss private banks to the more established large organizations,” he said. “Today, given the relatively high cost of entry and the environment, a lot of them are having second thoughts.”

The industry won’t experience a “sustainable recovery” if “the market and economies are not on a solid growth path,” he said. Asia, led by China’s economic growth, is “much better off” than the rest of the world, he said.

The ranks of the world’s millionaires shrank at the fastest rate in 2008, cutting the number by 15 percent to 8.6 million, according to a survey published in June by Capgemini SA and Merrill Lynch & Co. The financial wealth of Asia-Pacific millionaires will surpass those of North Americans by 2013, the report said.

While Credit Suisse hasn’t cut private bankers’ basic compensation, there is unlikely to be a “massive” bonus at the end of the year, Kreis said. Personnel costs form the biggest cost component of the business.

Flat Salaries

“It’s probably fair to say that if at the end of this year you do a survey of increase in private banking salaries across the board, the level of increase would have shrunk dramatically compared to the heyday of 2004, 2005, 2006, 2007 when everybody tried to get into the industry,” he said.

Credit Suisse employed 390 relationship managers in the region at the end of the first quarter, down from 420 at the end of 2008, the bank said.

Rivals, including UBS AG and HSBC Holdings Plc, eliminated hundreds of jobs at their private-banking businesses in Asia this year.

Credit Suisse placed advertisements in regional and local newspapers in the last three months which displayed an invitation card to “experienced private bankers” to meet with senior executives in Singapore, Hong Kong, Japan and Australia.

“We have taken the opportunity to continue to hire experienced bankers, bankers who’ve gone through some previous crises, who understand the importance of advice as the center of what they do as opposed to just selling products,” Kreis said.

Asia Hires

Credit Suisse said in June it hired Tee Fong Seng from UBS as vice chairman and head of ultra-high net worth for private banking in the Asia-Pacific region effective Aug. 1. Tee was the head of wealth management in Southeast Asia and deputy branch manager at UBS in Singapore.

Kreis joined Credit Suisse in February 2007 from UBS, where he was the head of global wealth management in the Asia-Pacific region. He has worked in the private banking industry in Asia since 1983, including stints at Citibank and Merrill Lynch & Co. He has been based in Singapore since 1990, having previously worked in Hong Kong, Melbourne and Sydney.

Credit Suisse plans to continue to expand its domestic private banking businesses in Australia, China, Japan and Indonesia, he said.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net.

Last Updated: July 10, 2009 00:11 EDT