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 ($921 billion) 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 in the next 12 to 18 months, according to bankers, consultants and analysts interviewed by Bloomberg News. While Switzerland remains the biggest center for global offshore wealth with $2.2 trillion, or about 26 percent 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 Plc, 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 AG sold its Swiss units and ING Groep NV disposed of its private bank in Switzerland.
HSBC, Generali
More deals may be imminent. HSBC Holdings Plc, the biggest foreign private bank in Switzerland by assets under management, may sell parts of the unit, Chief Executive Officer Stuart Gulliver signaled in May. The bank doesn’t plan to exit Swiss private banking altogether, he said.
Italian insurer Assicurazioni Generali SpA 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 SpA.
A report last week by PricewaterhouseCoopers LLP 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 percent in the last two years, PwC said in the report.
Reviewing ‘Footprints’