KPMG and the University of St.Gallen's annual analysis of Swiss private banks shows that banks generated record high Net New Money and Assets under Management last year. Large Independent Asset Managers are also growing, and are responsible for more AuM than all small banks combined.
It is 12 years since we launched our annual analysis of Switzerland's private banks. A huge number of banks have disappeared since. In fact, our first edition in 2010 covered 163 banks. It is now down to 92. This figure alone demonstrates the transformation the industry has gone through over the past decade.
By 2015, the implications of a wave of new regulations, end of banking secrecy, tax transparency, and automatic exchange of information had become clear. Most banks recognized the need to change, seeking to reposition themselves by adapting business models, streamlining operating models and in many cases adopting new strategies. Many did so successfully, but not all.
I have seen first-hand with my clients how stronger banks achieved high Assets under Management (AuM) growth from Net New Money (NNM) and performance – and how they have realized economies of scale, significantly lowered their cost-income ratios, and stabilized their income margins. This puts them in an excellent position, which will be needed as rapidly rising inflation, higher interest rates, and huge geopolitical concerns all begin to impact global wealth management.
Here is our take on how banks performed in recent years, in 2021-22 in particular:
Banks have been on different trajectories during the transformation
Back in 2015, the Return on Equity of our four clusters of Swiss banks (Strong, Upper mid, Lower mid, Weak) were remarkably similar. Time has treated each grouping very differently since. By 2021, the gap was dramatic – median RoE for the Strong banks was 11.1% and a very poor -1.7% for the Weak banks.
Around half of Swiss banks have emerged in a strong position
The strongest make up around half of Switzerland's private banks. They have spent years restructuring and investing, yielding significant strategic and operational improvements. The benefits of these efforts are now evident in considerable improvements to gross profit, NNM and AuM growth.
2021 was a golden year for AuM growth
At CHF 3.2 trillion, AuM at the end of 2021 was the highest we have ever seen. It is an impressive 12.5% higher than 2020 and almost 50% higher than 2015. This has been achieved through outstanding levels of NNM, which also hit a new record last year. 2021 was the third consecutive year of strong and increasing NNM growth.