MT Survey of surveys: Private banking

As the numbers of the extremely wealthy have swelled worldwide, so has the business of the private banks. Transparency is hard to achieve here, but banking secrecy is not what it was. David Bain reports.

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Last Updated: 31 Aug 2010

A part of the financial services sector that keeps itself well hidden from the public glare is where the rich stash their cash - private banks.

We've all heard of investment bank monoliths like Goldman Sachs and JP Morgan, but less familiar are private banking dynasties such as Pictet, MeesPierson and C Hoare & Co, all specialists in pandering to the fiscal needs of the world's wealthy.

Private banks have flourished over the past 10 years as the ranks of the rich have swelled. Today, an estimated 7.3 million individuals worldwide control a remarkable $27.2 trillion in liquid assets, according to the annual Wealth Report produced by Merrill Lynch and Cap Gemini Ernst & Young.

The 'private' in private banking comes from the renowned secrecy of the Swiss banks, which grew up after the Napoleonic wars to protect the assets of the rich from the prying eyes of often hostile governments. Yet this secrecy has not fared well in the post-9/11 world, where tracking down sources of terrorist financing and enforcing anti-money laundering measures preoccupy officials in Washington and Brussels. Tax-hungry governments are also making it harder for the rich to squirrel their money away out of the taxman's reach.

The lack of transparency has always been a problem in obtaining information.

Most private banks are, by their nature, reluctant to release details about themselves to a wider public. Swiss private banks tend to be partnerships and don't have awkward shareholders to deal with. British private banks such as Coutts and Schroders Private Bank are components of much larger organisations and their numbers are easily subsumed into the reports of the Royal Bank of Scotland and Schroders Investment Management, respectively.

The well-established annual PAM Directory attempts to bring transparency to UK private banking, with league tables based on assets under management - the most widely used benchmark of the health of private banks - and client numbers. And others are keen to get in on the act of measuring the success of this most discreet sub-sector of the financial services industry. Wealth management consultancy Scorpio Partnership has been benchmarking private banks since 2002, using a methodology similar to that of PAM. And that favourite publication of the investment banking world, Euromoney, recently got in on the act with an annual survey on the best-in-class private banks, conducted on a peer review basis.

The Swiss are still global major players, but some names are becoming more familiar as consolidation makes its mark. Citigroup, HSBC and Merrill Lynch all have huge private banking businesses and have deep pockets to fund an increase in their market share. The two acknowledged titans of private banking - UBS and Merrill Lynch - manage about $965 billion and $837 billion respectively, according to the Scorpio survey. UBS's acquisition of Paine-Webber in 2000 gave the Swiss money manager a foothold in the vital US market. The nearest rival to UBS and Merrill is Zurich-based Credit Suisse Private Bank with $399 billion of assets under management.

UBS also takes the gold medal in Euromoney's peer poll of the best global private banks, followed this time by Citigroup Private Bank and, in third place, London-based HSBC Private Bank. Clive Bannister, chief of HSBC Private Bank and son of four-minute miler Roger, is running that extra mile himself to see his bank in the top three globally. Currently, the bank lies in fifth spot in the Scorpio survey. In the UK, HSBC makes it into only eighth spot in PAM's main survey.

Closer to home, Coutts gets top billing in the UK in the Euromoney survey and second place in PAM's survey, with £19.5 billion of assets under management.

The Queen's banker, Coutts is the still the sine qua non of private banking in Britain, although these days the fact that the Beckhams bank there is probably more of a draw than Her Majesty.

Barclays Private Clients tops the UK PAM survey in 2003 with £29.5 billion of assets under management. Earlier this year, Barclays acquired Gerrard, adding more than £12 billion in assets and 140,000 new clients. Brewin Dolphin kept its third place in 2003, despite its assets under management falling by £3 billion from the previous year.

C Hoare & Co skipped into fourth place in the Euromoney survey, but has few assets under management and not many clients, so it doesn't feature in the PAM surveys. The Fleet Street bank claims to be the oldest surviving independently run bank in the UK, with the Hoare family at the helm since 1672.

Future surveys should confirm the trend towards global banks such as HSBC, UBS and Citigroup gobbling up market share from the local banks.

Nevertheless, the desire of the rich for exclusivity and rarity should ensure that smaller-name wealth managers retain their place for a few more years yet.

TOP 10 PRIVATE BANKS WORLDWIDE BY ASSETS UNDER MANAGEMENT

1st half 2003 1st half 2002 % change

dollars bn dollars bn

1 UBS* 965 973 -1

2 Merrill Lynch 837 817 +2

3 Credit Suisse** 399 425 -6

4 Deutsche Bank Prvt Wlth Mgmt 159 - -

5 HSBC Republic*** 144 - -

6 JP Morgan Chase 130 138 -6

7 Morgan Stanley 113 116 -3

8 Goldman Sachs ca 97 - -

9 Northern Trust 94 92 +2

10 ABN Amro 94 96 -2

*Including UBS Wealth Management, UBS Wealth Management USA and UBS

Subsidiary Private Banks

**Including CS Private Bank and CSFB Private Client Services

***2002 figures

Source: Scorpio Partnership 2003 Interim Ranking of Global HNW Wealth

Managers

 

 

BEST PRIVATE BANKS - WORLDWIDE

1 UBS

2 Citigroup Private Bank

3 HSBC Private Bank

4 Credit Suisse Private Banking

5 JP Morgan Private Bank

6 Deutsche Bank Private Wealth Mgmt

7 Pictet & Cie

8 Goldman Sachs

9 BNP Paribas

10 MeesPierson

Source: Euromoney Magazine

 

 

BEST PRIVATE BANKS - UK

1 Coutts & Co

2 UBS

3 HSBC Private Bank

4 Hoare & Co

5 Goldman Sachs

6 Rothschild

7 JP Morgan Private Bank

8 Citigroup Private Bank

9 Rathbones

10 Adam & Co

Source: Euromoney Magazine

 

 

WHERE THE CLIENTS LIVE: BILLIONAIRES BY CITY

London: 40 billionaires

New York: 31 billionaires

Moscow: 23 billionaires

Source: Sunday Times Rich List 2004

 

 

TOP 10 UK WEALTH MANAGERS BY ASSETS UNDER MANAGEMENT

2003 2002 % of top 10

pounds m pounds m total 2003

1 Barclays Private Clients 29,467 n/a 25.4

2 Coutts & Co 19,535 12,900 16.8

3 Brewin Dolphin Securities 13,500 n/a 11.7

4 Gerrard 12,500 17,400 10.7

5 Lloyds TSB Private Banking 9,400 11,200 8.1

6 SG Hambro 6,959 7,100 5.9

7 Goldman Sachs International 6,800 17,300 5.8

8 HSBC Investment Management 6,531 8,161 5.6

9 Charles Stanley & Co 6,200 7,000 5.4

10 Merrill Lynch International 5,717 11,491 4.6

Source: PAM 2003, UK Edition

 

 

TOP 10 UK WEALTH MANAGERS BY NUMBER OF CLIENTS

Number of % of top 10

clients total 2003

1 Gerrard 143,000 27.8

2 Brewin Dolphin Securities 90,000 17.4

3 Coutts & Co 50,000 9.7

4 Barclays* 47,337 9.3

5= BWD Rensburg Investment Management 45,000 8.7

5= Walker, Crips, Weddle, Beck 45,000 8.7

7 James Brearly & Sons 35,000 6.8

8 HSBC Private Clients 30,000 5.8

9 SG Hambro 15,958 3.0

10 HSBC Investment Management 13,674 2.8

*Inc. Barclays Personal Investment Management, Barclays Private Bank and

Barclays Stockbrokers Advisory

Source: PAM 2003, UK Edition

The combined wealth of Britain's richest 1,000 people is £202.4bn.

Of these 1,000, 746 are self-made millionaires. But only 76 are women.

Source: Sunday Times Rich List 2004

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