Private banking AUM growth turns north

Assets under management at global private banks grow at 15%, a return to late 1990s levels, says Scorpio Partnership.

The global private banking industry manages over $4.6 trillion and, after declines in the past few years, has seen asset management growth rev up to 15% in local currency terms, a return to the heady days of the late 1990s, according to London-based research firm Scorpio Partnership. This reflected both improved market valuations as well as an influx of money from new and existing clients.

UBS continued to lead its ranking of private banks by AUM, reporting $1.031 trillion of high net worth client assets at the end of 2003, representing a year-on-year growth of 8.9% in Swiss franc terms and 26% growth in US dollar terms, thanks to the slide in the dollar. Merrill Lynch ranked second with $935 billion, and Credit Suisse third with $394 billion.

Profits at the top-ranked private banks also rose in 2003 though not as much as AUM. "The improvement in business performance has only occurred in the last six to nine months, and it is not expected that overall profit levels will show the signs of this growth until year-end 2004," says Sebastian Dovey, managing partner at Scorpio. He says that for the 14 banks providing pre-tax profit details, the average rise was only 0.72%, although for the top five, average pre-tax profits rose 13.5%. At the same time, private banks slashed headcount by an average of 3.3% in 2003.

Scorpio's research is based on a review of 120 institutions and the 2003 year-end results of over 50 private banks. Dovey says these figures underestimate the true size of the private banking industry because a handful of institutions such as Bank of America, one of the world's biggest, were not able to provide detailed 2003 figures in time for the report's release.