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09-07-13, 16:36
http://www.businesstimes.com.sg/archive/monday/premium/top-stories/private-banks-leaving-switzerland-end-secrecy-hurts-profits-20130708
Published July 08, 2013
Private banks leaving Switzerland as end of secrecy hurts profits
Wave of M&As in next 12-18 months likely, say analysts
[ZURICH] For European lenders with private-banking aspirations, a presence in Switzerland used to be a must. Now, with bank secrecy eroding and rising compliance costs chipping away at profits, more are saying adieu.
The number of foreign-owned Swiss banks fell to 129 by the end of May from 145 at the start of 2012, according to data from the Association of Foreign Banks in Switzerland. Assets under management slid by a quarter to 870.7 billion Swiss francs (S$1.2 trillion) in the five years through 2012 as clients withdrew money or paid taxes on undeclared accounts, the data show.
A crackdown on bank secrecy and increased regulatory scrutiny may unlock a wave of mergers and acquisitions (M&As) in the next 12 to 18 months, according to bankers, consultants and analysts. While Switzerland remains the biggest centre for global offshore wealth with US$2.2 trillion, or about 26 per cent of the market, according to Boston Consulting Group, departures may further chip away at the Alpine Republic's status.
"There will be a bit of a shakeout among private banks," said Felix Wenger, a Zurich-based director and co-head of the private-banking practice at consulting firm McKinsey & Co. "Specifically for Switzerland, some foreign players might conclude that an exit is a better option."
Some already have. Lloyds Banking Group, Britain's biggest mortgage lender, sold its international private-banking business in May to Swiss wealth manager Union Bancaire Privee, which also bought part of the offshore business in Geneva from Spain's Banco Santander SA a year ago. In 2009, Commerzbank sold its Swiss units and ING Groep disposed of its private bank in Switzerland.
More deals may be imminent. HSBC Holdings, the biggest foreign private bank in Switzerland by assets under management, may sell parts of the unit, Chief executive officer Stuart Gulliver signalled in May. The bank doesn't plan to exit Swiss private banking altogether, he added.
Italian insurer Assicurazioni Generali is trying to sell BSI Group, the 140-year-old Lugano-based private bank. More banks may also be reviewing their presence in Switzerland, said Christopher Wheeler, a London-based analyst at Mediobanca.
A recent report by PricewaterhouseCoopers (PwC) showed that an increasing number of wealth-management firms worldwide see more mergers. More than a third of those surveyed expect "significant consolidation" over the next two years, compared with 7 per cent in the last two years, PwC said in the report.
The shake-up in Europe is leading to a widening gap between top performers and "also-rans", McKinsey said in an industry survey last month. Almost a third of private banks in the region had outflows of funds in 2012, while about one bank in six recorded a loss, according to the report, based on an analysis of more than 160 private banks globally. "As a result, many players are reviewing their geographical footprint, especially in offshore markets, leading to renewed M&A activity," the McKinsey report said.
An eastward shift in riches is nibbling away at Switzerland's lead over rival centres of cross-border wealth. Its market share slipped to 26 per cent from 27 per cent in 2011, and by 2017 may decline to 25 per cent, according to Boston Consulting's Global Wealth report in May. Singapore is likely to grow to 12 per cent from 10 per cent, according to the forecasts.
The United States has been investigating Swiss banks and units of foreign banks in the country, including that of London-based HSBC, after UBS in 2009 avoided prosecution by admitting it fostered tax evasion and delivering data on about 4,700 accounts of Americans. France and Germany have been searching for tax dodgers using data stolen from Swiss banks and also sharing some of the information with authorities in other European countries.
Agreements with Britain and Austria to collect taxes on behalf of those countries on accounts held in Switzerland have been in force since January, and Switzerland is in talks with other European countries on taxing secret accounts.
The country will join the international push against tax dodgers and help develop global standards allowing banks to share customers' details to combat tax evasion, Finance Minister Eveline Widmer-Schlumpf said in June.
"A combination of government actions from the US and the EU and increased regulatory pressure is likely to trigger further changes in Swiss private banking because it will make it more costly to do business," said Francois-Xavier de Mallmann, head of investment-banking services in Europe for Goldman Sachs. "We expect consolidation to continue in private banking and to likely accelerate as the uncertainty weighing on the sector decreases." - Bloomberg
Published July 08, 2013
Private banks leaving Switzerland as end of secrecy hurts profits
Wave of M&As in next 12-18 months likely, say analysts
[ZURICH] For European lenders with private-banking aspirations, a presence in Switzerland used to be a must. Now, with bank secrecy eroding and rising compliance costs chipping away at profits, more are saying adieu.
The number of foreign-owned Swiss banks fell to 129 by the end of May from 145 at the start of 2012, according to data from the Association of Foreign Banks in Switzerland. Assets under management slid by a quarter to 870.7 billion Swiss francs (S$1.2 trillion) in the five years through 2012 as clients withdrew money or paid taxes on undeclared accounts, the data show.
A crackdown on bank secrecy and increased regulatory scrutiny may unlock a wave of mergers and acquisitions (M&As) in the next 12 to 18 months, according to bankers, consultants and analysts. While Switzerland remains the biggest centre for global offshore wealth with US$2.2 trillion, or about 26 per cent of the market, according to Boston Consulting Group, departures may further chip away at the Alpine Republic's status.
"There will be a bit of a shakeout among private banks," said Felix Wenger, a Zurich-based director and co-head of the private-banking practice at consulting firm McKinsey & Co. "Specifically for Switzerland, some foreign players might conclude that an exit is a better option."
Some already have. Lloyds Banking Group, Britain's biggest mortgage lender, sold its international private-banking business in May to Swiss wealth manager Union Bancaire Privee, which also bought part of the offshore business in Geneva from Spain's Banco Santander SA a year ago. In 2009, Commerzbank sold its Swiss units and ING Groep disposed of its private bank in Switzerland.
More deals may be imminent. HSBC Holdings, the biggest foreign private bank in Switzerland by assets under management, may sell parts of the unit, Chief executive officer Stuart Gulliver signalled in May. The bank doesn't plan to exit Swiss private banking altogether, he added.
Italian insurer Assicurazioni Generali is trying to sell BSI Group, the 140-year-old Lugano-based private bank. More banks may also be reviewing their presence in Switzerland, said Christopher Wheeler, a London-based analyst at Mediobanca.
A recent report by PricewaterhouseCoopers (PwC) showed that an increasing number of wealth-management firms worldwide see more mergers. More than a third of those surveyed expect "significant consolidation" over the next two years, compared with 7 per cent in the last two years, PwC said in the report.
The shake-up in Europe is leading to a widening gap between top performers and "also-rans", McKinsey said in an industry survey last month. Almost a third of private banks in the region had outflows of funds in 2012, while about one bank in six recorded a loss, according to the report, based on an analysis of more than 160 private banks globally. "As a result, many players are reviewing their geographical footprint, especially in offshore markets, leading to renewed M&A activity," the McKinsey report said.
An eastward shift in riches is nibbling away at Switzerland's lead over rival centres of cross-border wealth. Its market share slipped to 26 per cent from 27 per cent in 2011, and by 2017 may decline to 25 per cent, according to Boston Consulting's Global Wealth report in May. Singapore is likely to grow to 12 per cent from 10 per cent, according to the forecasts.
The United States has been investigating Swiss banks and units of foreign banks in the country, including that of London-based HSBC, after UBS in 2009 avoided prosecution by admitting it fostered tax evasion and delivering data on about 4,700 accounts of Americans. France and Germany have been searching for tax dodgers using data stolen from Swiss banks and also sharing some of the information with authorities in other European countries.
Agreements with Britain and Austria to collect taxes on behalf of those countries on accounts held in Switzerland have been in force since January, and Switzerland is in talks with other European countries on taxing secret accounts.
The country will join the international push against tax dodgers and help develop global standards allowing banks to share customers' details to combat tax evasion, Finance Minister Eveline Widmer-Schlumpf said in June.
"A combination of government actions from the US and the EU and increased regulatory pressure is likely to trigger further changes in Swiss private banking because it will make it more costly to do business," said Francois-Xavier de Mallmann, head of investment-banking services in Europe for Goldman Sachs. "We expect consolidation to continue in private banking and to likely accelerate as the uncertainty weighing on the sector decreases." - Bloomberg