UBS pips Bank of America as world's largest private bank

UBS won back the title of largest private bank in the world as inflows of fresh client funds surged last year, indicating restored confidence following the financial crisis, according to a study.

The Swiss bank displaced Bank of America Corp from the top spot in an annual benchmark compiled by London-based wealth management consultant Scorpio Partnership. It edged out the U.S. bank with 9.7 per cent growth in overall assets to $1.705 trillion, compared with 5.9 per cent at Bank of America.

The ranking is a coup for scandal-tarnished UBS, which in October said it would axe 10,000 staff and scale back its riskier investment banking division in favor of its private bank.

Activist fund Knight Vinke in May launched a campaign to break up UBS, though a forecast-beating first quarter and the highest wealthy customer inflows in six years took some of the sting out of the shareholder's demands.

Overall, private banks won 24 per cent more net new money, which represents a dramatic turnaround. Financial providers to the wealthy had struggled to win back client confidence in the wake of the global financial crisis.

However, the inflows have not yet translated to greater profits, which rose only 5.3 per cent, according to Scorpio. This means private banks must still cut costs to lift profitability.

"The analysis of the data shows there are still signs of weakness in the model for many operators," Scorpio said in the study.

Private banks typically sit on a high base of fixed costs, and in many cases, costly trading arms, so they rely on transaction fees generated by client trades for income.

This presents a problem when clients remain on the sidelines and park in cash products, as they largely have done since the financial crisis despite urgings from their advisors.

The findings come as private banks pull out the stops to entice the fast-growing ultra-rich segment, which although is not more profitable than the wealthy sector, makes up for it in volume.

The ultra-rich tend to feed more business to investment banking and asset management arms by demanding specialized and sophisticated services.

U.S. banks Wells Fargo and Morgan Stanley as well as Switzerland's Credit Suisse round out the top five in the Scorpio benchmark.


Copyright Thomson Reuters 2013