By Helena Smolak
UBS Group's smaller Swiss rivals have been on a hiring spree for former Credit Suisse employees, hoping to take a bigger slice of the wealth-management market.
Credit Suisse's downfall and its subsequent rescue deal by UBS last year created a potential opportunity for the likes of Julius Baer Gruppe, EFG International and Vontobel Holding to poach advisors and the assets they managed.
As a result, competition in the Swiss wealth-management market looks set to intensify this year, with UBS trying to win back clients and Swiss private banks looking to reap the benefits of their extensive hiring. Analysts say there could be room for both UBS and its smaller rivals to grow.
"We have seen client advisors departing from Credit Suisse; but we have not seen yet the impact they have on the banks they joined," Vontobel senior analyst Andreas Venditti told The Wall Street Journal.
The stakes are high as Swiss and global players set their sights on wealth management and private banking, a business that is lucrative for banks and highly valued by investors, with Switzerland as a prized market.
UBS gained more than 1,500 client advisors from Credit Suisse but lost around 500 of them during and in the aftermath of the crisis period, Chief Executive Sergio Ermotti said during the bank's third-quarter presentation last year.
The lender employed 112,842 people at the end of 2023, around 10,000 fewer employees than UBS and Credit Suisse's combined headcount a year earlier.
"The collapse of Credit Suisse unleashed an extraordinary race for clients, talent and market share in the Swiss banking market," Ermotti and UBS Chair Colm Kelleher said in a letter to shareholders ahead of the bank's annual general meeting.
Among the listed Swiss private-wealth managers, Julius Baer hired around 190 former Credit Suisse relationship managers last year, according to its annual report. EFG recruited 141 client advisors last year of which 30% came from Credit Suisse, Chief Executive Giorgio Pradelli said at the time of its 2023 results. Vontobel said it hired almost 60 wealth-management experts in 2023, but not where they joined from.
Bank J. Safra Sarasin, Lombard Odier and Union Bancaire Privee declined to comment. A Pictet Group spokesman said the firm's recruitment policy remains unchanged with no concentration from either Credit Suisse or UBS.
After months of onboarding the new hires and bringing over their former clients, the effect of the hiring spree on Swiss private banks is expected to become visible this year, analyst Venditti said.
Quantifying the impact of the Credit Suisse demise on Swiss banks remains challenging, as they are reluctant to disclose the origins of their money flows. A total of 211 billion Swiss francs ($231.77 billion) flowed out of Credit Suisse from October 2022 to June 2023.
Before Credit Suisse collapsed, wealthy clients withdrew their money and parked it at Swiss cantonal banks that are majority-owned by the regional governments and seen as safe due to an explicit state guarantee, Venditti said.
St. Galler Kantonalbank, a cantonal bank, said one-third of the growth in net new assets from private clients last year came from Credit Suisse.
However, Urs Baumann, chief executive officer of Switzerland's largest cantonal bank Zuercher Kantonalbank, told The Wall Street Journal that "the Credit Suisse effect is not as significant as generally assumed."
Consensus estimates for listed Swiss wealth managers suggest the market anticipates new money inflows to accelerate, even if costs go up due to the hiring activity.
Analysts expect for Julius Baer a 50% on-year jump in net new money for 2024 to CHF18 billion after worries about its exposure to Austrian property group Signa--which filed for insolvency late in 2023--calmed down, according to consensus estimates provided by Vara Research. Likewise, EFG's net new money flows are estimated to rise to CHF7.9 billion compared with CHF6.2 billion in 2023, according to a company-compiled consensus.
Still, UBS's expanded global operations tower over its domestic rivals. The Swiss banking giant targets about $100 billion a year in net new money this year and next, adding to the $3.850 trillion it had at the end of 2023. It also aims to exceed $5 trillion in wealth-management assets by 2028.
By comparison, Julius Baer had CHF427 billion, or $469 billion, in assets under management at the end of last year. The growth UBS expects in wealth management over the next five years is the equivalent of adding two wealth managers of Julius Baer's size.
Since UBS and its smaller Swiss rivals have different priorities, the situation could work out for both, analyst Venditti said. Whereas UBS's priority is to reduce costs to improve profitability and optimize its existing business first, its Swiss rivals will be under pressure from their shareholders to show the benefits of their hiring activity, he said.
Write to Helena Smolak at helena.smolak@wsj.com
(END) Dow Jones Newswires
April 22, 2024 10:53 ET (14:53 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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