Swiss banks need on average to double the assets they manage in order to remain in business as mergers increase among the wealth-management companies, according to a KPMG study.
About two-thirds of 39 banks surveyed expect survival to depend on a two-fold increase in client assets, the Zurich unit of the accounting and business advisory firm KPMG said today in an e-mailed statement. Banks need to grow beyond a minimum 10 billion Swiss francs ($11 billion) of managed assets to cope with more complex requirements from clients and regulators, according to the study.
“Many private banks need to grow substantially,” KPMG said in the statement. “Private banks will need to compensate for low profitability through consolidation and the related economies of scale, through international expansion and through investment in technology.”
Julius Baer Group Ltd., the third-biggest Swiss private wealth manager, is boosting assets this year through the acquisition of Bank of America Corp.’s non-U.S. Merrill Lynch wealth businesses, while Geneva-based Union Bancaire Privee absorbed Swiss units of Lloyds Banking Group Plc and ABN Amro Bank NV in the past two years. UBS AG, Switzerland’s biggest bank, increased wealth-management assets to more than 1.7 trillion francs worldwide in the nine months through September.
Wealth managers in Switzerland are expecting more deals after “several years” of pressure on margins, according to the survey, which was compiled by KPMG and the University of St. Gallen. While some of the larger companies are making purchases, smaller firms need to focus on cost structure, build partnerships with other managers and use more technology as expenses increase, according to the report.
Wealth managers also said the nation with more than 300 banks is ending its tradition for financial secrecy, in response to pressure from foreign fiscal authorities. More than 60 percent of respondents expect a system of automatic exchange of information between tax collectors in different countries to be introduced within three years, meaning banks would provide data on cross-border client accounts that could be passed to customers’ home tax authorities.
Most private bankers can expect pay to stagnate or decline as more than 40 percent of respondents forecast employee compensation to drop at least 15 percent by 2022, KPMG said. Only 9 percent of respondents expect remuneration to increase compared with today’s levels, according to the report.