Global instability, tight monetary policy, regulation, client and salary expectations push up costs
Last year saw a paradigm shift, with the impact of war in Ukraine and rising protectionism, on top of the residual impact of the Covid-19 pandemic, contributing to a resurgence of inflation and higher interest rates.
Longer-term structural pressures, including customer demand for seamless digital services and new products, suggest cost pressures will also continue to constrain profitability at Luxembourg private banks.
More cost-efficient than Swiss banks
Even so, Luxembourg’s universal private banks and wealth management specialists improved their cost-income ratios last year, from a median 75.8% to 70%. They also had a tighter rein on costs than their Swiss peers, whose median ratio rose slightly to 81.3% in 2022.
That is despite the EU’s regulatory burden, which accounts for 23% of total direct costs. The biggest pressure on institutions was for market data, likely linked to rapidly increased demand for ESG fund classification and reporting information.
The tight labor market is not helping. Staff expenses rose by 7.8%, with more to come, as many salaries are indexed directly to inflation, which remains stubbornly above the European Central Bank target.
| KPIs | |
AuM |
25th percentile |
Median (EUR bn) |
|
75th percentile |
|
FTEs |
25th percentile |
Median |
|
75th percentile |
|
Cost-income |
25th percentile |
| Median | |
75th percentile |
|
Return on AuM |
25th percentile |
| Median | |
75th percentile |
|
Return on AuC |
25th percentile |
| Median | |
75th percentile |
|
Universal banks |
|||
|---|---|---|---|
2021 |
2022 |
Change | # answers |
2.47 |
2.37 |
(4.04%) |
15/15 |
7.70 |
9.86 |
28.03% |
|
23.05 |
20.85 |
(9.58%) |
|
31 |
31 | 0.46% |
14/15 |
102 |
105 |
3.27% |
|
270 |
180 |
(33.29%) |
|
61.01% |
58.76% |
(2.25pp) |
13/15 |
66.77% |
66.32% |
(0.44pp) |
|
74.89% |
77.90% |
3.01pp |
|
0.40% |
0.43% |
0.03pp |
12/15 |
0.56% |
0.58% |
0.02pp |
|
0.65% |
0.75% |
0.10pp |
|
0.19% |
0.21% |
0.02pp |
7/15 |
0.26% |
0.23% |
(0.03pp) |
|
0.47% |
0.33% |
(0.14pp) |
|
WM only, no branches |
|||
|---|---|---|---|
2021 |
2022 |
Change | # answers |
1.24 |
1.40 |
12.64% |
16/16 |
3.25 |
2.56 |
(21.26%) |
|
5.30 |
4.54 |
(14.34%) |
|
30 |
33 |
10% |
16/16 |
41 |
44 |
9.24% |
|
88 |
87 |
(0.90%) |
|
58.37% |
50.91% |
(7.47pp) |
15/16 |
75.78% |
65.60% |
(10.18pp) |
|
94.50% |
83.45% |
(11.05pp) |
|
0.38% |
0.40% |
0.02pp |
13/16 |
0.49% |
0.66% |
0.15pp |
|
0.75% |
0.82% |
0.12pp |
|
0.06% |
0.04% |
(0.02pp) |
4/16 |
0.15% |
0.20% |
0.05pp |
|
0.36% |
0.45% |
0.09pp |
|
WM with branches |
|||
|---|---|---|---|
2021 |
2022 |
Change | # answers |
7.74 |
8.99 |
16.10% |
7/7 |
10.14 |
10.62 |
4.78% |
|
19.33 |
18.63 |
(3.59%) |
|
135 |
158 | 16.85% |
7/7 |
145 |
169 |
16.61% |
|
313 |
327 |
4.55% |
|
86.55% |
71.75% |
(14.81pp) |
6/7 |
96.02% |
80.69% |
(15.33pp) |
|
106.3% |
89.11% |
(17.21pp) |
|
0.44% |
0.42% |
(0.02pp) |
7/7 |
0.48% |
0.60% |
0.12pp |
|
0.55% |
0.66% |
0.11pp |
|
0.11% |
0.17% |
0.06pp |
3/7 |
0.11% |
0.24% |
0.13pp |
|
0.24% |
0.34% |
0.10pp |
|
WM only, branches as booking center |
|||
|---|---|---|---|
2021 |
2022 |
Change | # answers |
11.52 |
10.79 |
(6.32%) |
8/8 |
15.65 |
15.42 |
(1.46%) |
|
21.98 |
21.39 |
(2.68%) |
|
100 |
99 | (0.80%) |
8/8 |
188 |
189 |
0.55% |
|
295 |
307 |
4.16% |
|
75.59% |
63.59% |
(12pp) |
7/8 |
88.12% |
69.88% |
(18.24pp) |
|
91.05% |
92.17% |
1.12pp |
|
0.47% |
0.53% |
0.06pp |
6/8 |
0.60% |
0.66% |
0.06pp |
|
0.65% |
0.69% |
0.04pp |
|
0.04% |
0.07% |
0.03pp |
3/8 |
0.08% |
0.15% |
0.07pp |
|
0.18% |
0.22% |
0.04pp |
|
