Credit Suisse Sees More Shakeups in Asia Private Banking

Jakarta Globe ^ | 06/03/2013 | John O'Callaghan

[TexGrill]

Singapore. Asia’s private banking sector will consolidate further as the costs of serving wealthy clients make the business profitable for only the big firms, the head of Asia-Pacific private banking at Credit Suisse Group AG said on Monday.

With a cost-to-income ratio of at least 80 percent, most private banks are losing money even as the ranks of the rich explode in fast-growing Asia, Francesco de Ferrari told the Reuters Wealth Management Summit in Singapore.

The ratio, a key measure of profitability, shows private banks spend 80 cents on costs including salaries, office space and compliance for every dollar they bring in from clients.

“The industry at the current cost-to-income ratio is not really sustainable,” de Ferrari said. “So we will see a lot more consolidation in the private banking industry over the next three to five years in Asia for sure.” The shakeup in the region has accelerated.

Significant deals include Bank of America Merrill Lynch sold its overseas wealth management business to Switzerland’s Julius Baer Gruppe AG last year, and HSBC Holdings Plc sold its private bank in Japan to Credit Suisse in December 2011.

[TexGrill]

Big Bunsiness will soon push out small companies in the Asia-Pacific region. It will spell the downfall of the entrepreneurial spirit in the region.