Billionaire banking hits good times

GREAT NEWS! The wealthy are even wealthier thanks to a sharp turnaround in the fortunes of those secretive and not-so-secretive banks that specialise in looking after the affairs of those who have a minimum of $1m (£550,000) to invest with them.

The global private banking industry now looks after a staggering $4.6 trillion on behalf of individual multi-millionaires. After two years of watching the amount under their management fall by an average of 8%, 2003 turned out to be a bumper year with the revival of stock markets helping to boost assets under management by almost 15%.

That is the best improvement since the heady days of the late 1990s, says London-based wealth management think-tank Scorpio Partnership. Managing partner Sebastian Dovey said: 'The number of new accounts is certainly picking up but existing accounts are returning with money, having chosen property and other alternative investments for the previous couple of years.'

UBS became the first bank with more than $1 trillion under management for wealthy people. Like its European counterparts, it has benefited hugely from the slide in the dollar in 2003, making Swiss franc and euro accounts appear to swell even faster.

The industry continued to shed staff, losing another 3.3% against 4.8% in 2002. Dovey said: 'It has been a bloodbath for the last 18 months and they are much slower than the investment banks at rehiring. The private banking industry was a bit fat and somewhat indulgent until the turn of the century. Now the industry should be cautiously optimistic because there is still plenty of work to do in updating the underlying business model.'

Profitability also appears to lag the upturn in assets under management. While the top five's profits improved by 13.5% last year, another 14 out of the 50 banks surveyed by Scorpio said profits grew by an average of just 0.72%.

Joining UBS in the top five are Merrill Lynch, Credit Suisse, Deutsche Bank and HSBC. Dovey said the industry should not rest on its laurels. 'Global wealth management must not stand still as it has in the past,' he said. 'Instead, it should build on this positive swing to better position itself as a truly modern and customer-oriented service solution.'