Lloyds Banking Group Plc (LLOY) said it will continue to build its international private-banking business from Switzerland instead of Singapore, even after client assets at its Geneva unit declined 15 percent and as Swiss banking secrecy erodes.
Lloyds, the London-based bank that received a 20.3 billion- pound ($32.7 billion) government rescue following the 2008 credit crisis, has shifted Swiss employees into offices for as many as 400 people outside Geneva and may hire as many as 40 staff next year, according to Russell Galley, managing director for international businesses.
“Switzerland is a strategic priority, and it’s somewhere where we are investing,” Galley, who is based in Geneva, told reporters in Nyon, Switzerland today. “We’re not struggling at all.”
Swiss banks are trying to cut expenses after an appreciation of the nation’s currency and as investors’ reluctance to take risks in turbulent financial markets crimps profitability. Assets under management at Lloyds’s Geneva private bank dropped to 12.1 billion pounds at the end of June from 14.3 billion pounds a year earlier, according to a July financial report.
International wealth managers including Bank of America Corp. in the U.S. and Coutts, a subsidiary of the U.K.’s Royal Bank of Scotland Group Plc, have exited smaller cross-border businesses in some emerging markets amid growing compliance costs for offshore clients.
Lloyds, 40 percent owned by the U.K. government, has sold 182 billion pounds of non-core assets since 2008. The Geneva unit closed private-banking offices in Paraguay, Colombia and Guatemala this year and also lost client funds with departing relationship managers and after checking compliance procedures, Galley said.
The new Swiss offices for employees in asset management, wealth structuring, credit and operations are surrounded by a construction site, farming fields and vineyards north of Lake Geneva. Almost 300 people were required to relocate from a building in downtown Geneva next to the main offices of Pictet & Cie., Switzerland’s largest closely held private bank.
Lloyds “faced difficulties” in moving employees away from Geneva and 12 people left the company, Guy Healey, who oversaw the move, told reporters today. Relationship managers will continue to meet clients in premises housing 130 employees in central Geneva by the banks of the River Rhone.
Lloyds was established in Switzerland in 1919 and provides services for Britons, Latin Americans and people from the Middle East. The Geneva private bank has kept offices in Miami and Montevideo and had positive new money flows since Galley took over in June last year, he said.
The firm considered investing in Singapore before concluding the wealth market was “significantly overheating” with “ridiculous costs to open and a mobile client base with very little stability in the market,” Galley said. He expects Singapore and Hong Kong “to mature in the next 10 years or more.”
Wealth management in the two Asian cities may surpass Switzerland in size in the next 15 to 20 years, according to a May report by Boston Consulting Group.
Switzerland’s weakening of secrecy rules established in 1934 is encouraging some offshore customers to repatriate assets to home countries. The Alpine country may introduce due diligence obligations requiring banks to obtain self- declarations from foreign customers ensuring they are tax- compliant in their home countries, the federal government said in February.
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