20/07/2010
Profit margins erode further at private banks
In 2009, profit margins at private banks fell to 20 basis points compared with assets, from 26 basis points in 2008 ad 35 in 2007, according to the European Private Banking Survey 2010 from McKinsey & Company. Assets under management (EUR4.2trn) increased by an average of 10% (following a decline of 15% in 2008), of which 9 percentage points were due to market effects, and only 1 point to net inflows. The volume of assets under management show an important growth trend: private banks with less than EUR5bn in assets saw their cost-income ratio deteriorate last year to 89% from 81%, while the ratio for larger businesses remained unchanged at 60%. With profit margins of 42 basis points, Luxembourg companies retained their place at the top in terms of profitability in Europe, despite net outflows of 5%. Swiss firms saw a decline in their margins to 24 basis points from 33, and net outflows of 1%, although their assets increased by 11%. McKinsey states that the Singapore and Hong Kong markets were the winners in terms of cross-border business, while assets from western Europe rose 17%.
