Credit Suisse Voices Confidence on Private Banking Growth
Credit Suisse Group said Tuesday it was confident in its ability to grow its flagship private banking arm, picking up business from rivals that have been weakened by the financial crisis and undeterred by pressure on Switzerland's banking secrecy laws.
The Zurich-based bank said it aims to keep ramping up hiring with an eye to employing 4,000 private bankers in 2012, from roughly 3,400 currently. The lucrative unit, which manages money for wealthy individuals and families, is on track to grow net new client funds by 6% in the medium term and post a gross margin of 110-120 basis points. In the second quarter this year the margin was 119 basis points.
"Some of our competitors have obviously been hurt, and we've taken our chances out of that situation," Credit Suisse's Walter Berchtold said at a media briefing. Mr. Berchtold and other top private bankers at Credit Suisse are presenting the unit to investors Tuesday.
Swiss banks have long prospered by managing offshore money and funds from clients outside of Switzerland. Mr. Berchtold said tax perks alone aren't enough to prop up Switzerland's finance industry, and that Swiss banks must grow accustomed to differentiating themselves, such as through services or geographic expansion.
While boutiques without any investment banking or trading appear to be benefiting from the financial crisis by picking up assets, Credit Suisse has snagged assets off competitors such as UBS AG, which suffered outflows amid a streak of quarterly losses.
Credit Suisse, which offers private banking through its own brand as well as through independently managed boutique Clariden Leu, gained 10.7 billion Swiss francs ($10.3 billion) worth of fresh assets during the second quarter.
Although its hiring ambitions are now lower than an original goal of employing 4,100 private bankers by next year, statistics provided by Credit Suisse -- one of the best-capitalized banks globally -- show the bank is using the difficulties of securities markets to pick up experienced bankers.
"During the crisis, we concentrated a lot on upgrading our sales force," Berchtold said. The bank shed roughly 5% of private bankers it felt weren't performing and reinvested the money freed up to hire others.
Three-quarters of the private bankers hired in the first half of 2009 were senior -- more experienced, and presumably with a more loyal client following -- compared with less than half one year ago, Credit Suisse said. As a result, the average amount of net new funds transferred to the Swiss bank per advisor in the six months immediately after hiring has tripled since 2007, Credit Suisse said.
Mr. Berchtold says Credit Suisse is girding to scale up growth-per-advisor as a result, with each private banker able to handle up to 60 million Swiss francs more in assets on the bank's platform. If successful in garnering the assets, this could add up to additional pretax income of 1.6 billion Swiss francs for the bank, after minor investments.
Write to Katharina Bart at katharina.bart@dowjones.com
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