Despite the market upheavals unleashed by the US subprime mortgage crisis in summer 2007, with concomitant write-downs and liquidity crunches, the global wealth-management industry grew assets by 11.6% to $17.4 trillion. The biggest private banks gained the most, with three banks û UBS, Citi and Merrill Lynch û each running nearly $5 trillion between them, and another 24 institutions each managing $100 billion or more in private-client funds.
Of that 11.6% gain in total assets, 6.4% was attributable to net new money. Asia was the biggest driver with Asia accounting for 13% of total assets in the past year, nearly double the regionÆs share in 2006. For many fund-management companies, the private banking channel has become one of the most dynamic businesses in Asia.
EuropeÆs proportion has also grown, up 6% to 35% in 2007, while the United States saw a decline of 14% to 42% of funds managed by private banks.
ôThe emerging markets are now powering the results of many of the major global wealth-management operators with strong brands and distribution,ö says Sebastian Dovey, managing partner at Scorpio. He does add, however, the caveat that local, not global providers often enjoy better margins.
Dovey suggests that while there remains plenty of potential growth û the worldÆs millionaires still have an estimated $9 trillion of untapped bank deposits û many global providers are failing to meet client needs when it comes to credit and cash-enhanced facilities. He believes that private banks that can now offer better transactional banking and credit facilities have the chance to gain market share, particularly as more clients move to cash to avoid market turmoil.
Scorpio has released a study called the Private Banking KPI Benchmark 2008 that looks at 211 financial institutions within 116 corporate groups. It has found UBS and Citi have respective market shares of 10.9% and 10.3%. ôThe traditional assumptions of fragmentation in the private-banking sector appear to be exaggerated,ö Dovey says.
The study estimates that global private-banking assets are allocated as follows: $4.2 to direct equity, $3.2 trillion to fixed income, $2.5 trillion to third-party funds, $2.4 trillion to alternative assets and $1.6 trillion to in-house funds.
Scorpio ranks the 10 largest wealth managers as UBS ($1.9 trillion), Citi ($1.7 trillion), Merrill Lynch ($1.3 trillion), Credit Suisse ($745 billion), JPMorgan ($545 billion), Morgan Stanley ($522 billion), HSBC ($494 billion), Deutsche Bank ($286 billion), Wachovia ($285 billion) and BNP Paribas ($231 billion).
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