• Volatile markets, ‘hesitating’ clients crimp industry assets
  • Fastest growth seen at Chinese private banks, Scorpio says

UBS Group AG and Bank of America Merrill Lynch stand atop the private-banking industry, managing more than $3 trillion for the world’s wealthiest people even as assets slid.

The private bank at Zurich-based UBS oversaw $1.74 trillion at the end of 2015, compared with $1.75 trillion a year earlier, according to an annual study by London-based consulting firm Scorpio Partnership. Bank of America was second with $1.44 trillion, while Morgan Stanley dropped one spot in the rankings to No. 3. Assets under management shrank at all three private banks.

Fluctuations in global financial markets crimped private-bank assets by 1 percent, a reversal from growth averaging 2 percent in 2014. For its annual report, Scorpio surveyed more than 200 firms focusing on high-net-worth clients, typically with investable assets above $1 million.

“In the last financial year, the majority of private-banking institutions experienced a notable slowdown in AUM growth and a squeeze on operating margins,” the consulting firm said in a statement. “Among the factors affecting results has been volatile markets and clients hesitating to onboard business at levels previously experienced. The results portend tough times ahead for the industry adjusting to turbulent financial headwinds.”

Global RankingPrivate BankAUM (USD Billions)* AUM USD Growth*
2Bank of America Merrill Lynch$1,444.8-2%
3Morgan Stanley$1,439.4-2.8%
4Credit Suisse$687.3-7.2%
5Royal Bank of Canada$620.9-11.9%
8Goldman Sachs$369+1.7%
9BNP Paribas$357.3-4.6%
10Deutsche Bank$311.4 -6.8%

*As of Dec. 2015. Source: Scorpio Partnership Global Private Banking Benchmark 2016

The banks reported an average 6.9 decrease in net new money, compared with an average 26 percent increase a year earlier. The figure, which represents new assets managed for existing or new wealthy clients, is a key indicator of growth for private banks.

UBS recently imposed a partial hiring freeze in its wealth-management unit, after pretax profit from the business tumbled 41 percent to 557 million Swiss francs ($565 million) in the first quarter as it recorded the worst transaction volumes ever for the first three months of the year. Earnings fell a similar amount the quarter before, which Chief Executive Officer Sergio Ermotti called the “most challenging period” in several years, as the unit reported client outflows of 3.4 billion Swiss francs.

Chinese Banks

While UBS ranked first globally in assets for the fourth straight year, China Merchants Bank Co. had the fastest growth among the top 25 managers, a 58 percent jump to $192.9 billion. Industrial & Commercial Bank of China Ltd., China’s biggest bank, saw assets increase 29 percent to $154.1 billion.

Cost-to-income ratios across the industry fell to 80 percent from 81.4 percent in 2014 as operating efficiency improved, while Scorpio’s aggregate measure of client experience also improved.

The leading 25 private banks managed $11 trillion, or 56 percent of the market, buoyed by their efficiency and ability to appeal to a wider audience than smaller operators, Scorpio said.

“Ultimately, the market leaders have focused aggressively on improving their cost-effectiveness in their operating models in order to weather the storm as best as possible,” Sebastian Dovey, managing partner at Scorpio Partnership, said in the statement. “Private banks will now need to become much better informed on what to do next to generate the best outcomes for client experience from a new-assets and growth perspective.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE