European wealth managers increased assets
under management (AuM) on average 9% in 2010 but the industry
is far from a full recovery with onshore mid-sized businesses
feeling the most pressure to perform, research has found.
McKinsey’s annual private banking survey
reported only 2% of AuM in 2010 came from net new inflows with the
rest derived from market appreciation. Cost income ratios stood at
71%, compared to 64% in 2005–2007.
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Squeeze remains on
margins
The findings echo research from Boston
Consulting Group, Capgemini, PwC and Scorpio that point to
continued margin pressure driven by higher operating costs, pricing
and increasing client demands.
The McKinsey research indicated a wide gap
between “leaders” and “laggards” with almost a third of respondents
experiencing outflows last year (compared to 44% in 2009).
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By GlobalDataThe business models best suited to succeeding
in the current environment were universal banks in their home
markets and specialist boutiques. Both models achieved net inflows
of 4%.
Foreign onshore players on average struggled
in 2010, as in 2009, with inflows at a virtual standstill.
Offshore, specialist players managed to
outgrow the offshore booking centres of most international
players.
Profitability still below pre-crisis
levels
Industry profitability has yet to return to
pre-crisis levels. Profit margins improved by 4 basis points
(bps) last year but are still 11bps below the high of
2005-07.
Revenue margins were flat last year at 83bps,
compared with 100bps in 2005-2007.
The survey also confirmed growing investor
appetite for advisory mandates (up 11% from 2009), with assets
managed in this way increasing slightly more than the rise in
private banking AuM as a whole.
More than 160 banks from 26 countries, of
which more than 100 are from Western Europe, were surveyed.
