Europe’s private banking sector has reported a 14% increase in assets under management for the last year plus gross profit margins of 35%, according to McKinsey and Company’s sixth annual survey.
Owing to a rise in pre-tax profits of 8.1% in 2006, the industry’s profits have nearly doubled over five years, an increase of 47% since 2003.
Banks that expanded their cost base by as much as 27% have increased their roster of relationship managers by 18% and their assets under management by 24% on average, the Financial Times reports. However, banks that kept their cost base flat saw losses of 9% in relationship managers and only saw asset growth of 4% on average.
“Private banks that just try to rise with the tide, not having a clear growth strategy, are doomed. Not investing is largely equivalent to slowly running off the franchise. The consistency of investment into growth will be even more critical during the next downturn,” says McKinsey’s report.
The number of ultra high-net-worth investors has outpaced the increase in the rich by nearly twice the rate, accounting for 26% of private banking assets last year, up 3% since 2005.