It has long been the case that the medium-sized Swiss private banks have struggled to play the middle ground of having both the cachet of being traditional Swiss private banks and the ability to serve ever more global clients. Credit Suisse and UBS have been the go-to global Swiss banks. However, with the shake-up in the Swiss private banking wealth management industry as a result of growing complexities and costs around having offshore clients and their tax implications, the medium-sized Swiss banks are finding themselves in a boosted position.
For some, the shake-out has meant the ability to purchase assets from foreign players forced to leave the market.
In May, Swiss private bank J Safra Sarasin announced the acquisition of $10 billion of Morgan Stanley’s Swiss bank clients’ assets from EMEA and Latin America. It was part of Morgan Stanley’s decision to streamline away from non-core regions.
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| “There are many entrepreneurs in southern European markets who want to be diversified. And in emerging markets many want to put their assets outside of their countries for political and safety reasons. There are key financial centres that are important for them, such as Switzerland" - Frédéric Rochat, Lombard Odier |
In 2013, Morgan Stanley sold its EMEA wealth management business to Credit Suisse. Several months ago it announced the transfer of its Asia clients out of the Swiss private bank – with branches in Zurich, Geneva, Hong Kong and Singapore – to its institutional business in Asia.
It’s only a small percentage of business for Safra, which as a group has around $205 billion in assets under management, with J Safra Sarasin managing $149 billion, but it boosts the bank’s access to EMEA and Latin American clients.
J Safra Sarasin chairman Ilan Hayim says in an interview with Euromoney that Sarasin had been looking at several buying opportunities from the increasing number of foreign and domestic banks that are looking to shed assets.
Being a medium-sized bank with a solid brand was helpful in the acquisition, says Hayim. He says relationship managers will be the decision-makers in the wave of consolidation, with brand a defining factor.
“It will be less which partner the bank wants, but rather which partner do the relationship managers see as being a fit, and whether the buying firm has the financial strength, reputation and clarity suitable for clients,” he says.
The medium-sized banks tend to benefit from being just large enough to appeal to relationship managers coming from large global organizations, and also have the ability to move fast.
With just one shareholder and being more streamlined, speed was an advantage, says Hayim. Negotiations lasted only six weeks.
He says the deal brings more high-quality staff to J Safra Sarasin, adding: “It is not easy to find good people or to convince them to move in Switzerland. So the type of consolidation happening in Switzerland right now gives access to good relationship managers.”
He adds: “There are many more sellers than buyers in Switzerland right now, but it’s about the cultural fit and whether you can integrate the clients and employees. It takes time to integrate, and making acquisitions for the sake of building size or reducing costs would be the wrong way to play this consolidation opportunity.”
The bank also recently hired a team of relationship managers out of Bank of Singapore in Singapore and Dubai.
Acquisitions are not absolutely necessary to take advantage of the shake-out in the Swiss wealth management industry.
Lombard Odier has managed to carve itself out as a mid-sized international player without taking part in a large-scale acquisition. It manages around $200 billion and is a fully privately owned partnership, which means it can be nimble.
Unlike the large wealth management firms, Lombard Odier did not have a fast-paced global expansion in the bullish era pre-crisis.
That means it has not had to review its operations and instead is in a position to take advantage of the number of international private banking clients that might now be looking for a home.
International retreat
Frédéric Rochat, a managing partner at Lombard Odier, says that although repatriation of assets onshore and regulation is leading some banks to retreat from international strategies, his firm regards being present in the key international centres as crucial to its strategy of serving entrepreneurs and their families.
“There are many entrepreneurs in southern European markets who are cautious about the future of the eurozone or the ability of their domestic countries to rein in their public finances, so want to be diversified. And in emerging markets many entrepreneurs want to put their assets outside of their countries for political and safety reasons. There is strong competition between financial centres such as the US, Luxembourg, Singapore, Hong Kong, London and Switzerland. Lombard Odier is able to serve its clients with a presence in most of them.”
Rochat says Lombard Odier does not take an acquisition strategy and as such has not been challenged by the complexities of integrating different technology systems. The firm has one platform only, which means that clients don’t have to bank in the same place where their portfolios are managed. “It means we have been able to constantly innovate and update the platform with few complications.”
He adds that international regulation will continue to evolve over the foreseeable future. “If you have international ambitions you need to be able to deploy services with a single backbone on the technology side. That will be a challenge for some banks.”
