Industry Surveys

North America Private Banks Have Banner Year In 2012, Profits Improve - McKinsey

Tom Burroughes, Group Editor, June 25, 2013

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Private banks in the US and Canada enjoyed a “banner year” in 2012 terms of net inflows of client money, while cost reduction also helped drive profit growth upwards, according to an annual survey of the sector by McKinsey & Company.

Private banks in the US and Canada enjoyed a banner year
in 2012 terms of net inflows of client money, while cost reduction also helped
drive profit growth upwards by an average of 11 per cent from the previous
year, according to an annual survey of the sector by McKinsey & Company.

Globally, many wealth management firms have faced major
challenges to business models although improved capital market performance has
boosted AuM, the report said. Top-line revenue growth “remains subdued”. More
than 160 banks took part in the survey, from North America, Europe, the Middle East
and Asia.

In general, the report shows an American private banking
industry returning to health, while Asia is also relatively robust, if not
growing quite as fast as in recent years, and Europe’s
wealth sector is stable, but with a wider split between the successful and
weaker players.

In recent weeks, RBC Wealth Management/Capgemini and Boston
Consulting Group have issued data showing the number of high net worth
individuals, and their total wealth, expanded last year as markets recovered.
The RBC/Capgemini report showed North America has regained its top spot from Asia as home to the biggest number of wealthy individuals
and their assets.

Interestingly, in recent months two large US-headquartered
firms – Morgan Stanley and Bank of America – have exited some, or all, of their
non-US wealth management operations, focusing on specific foreign markets as
well as the domestic ones. This suggests there are limits to how global some of
these businesses can be against a background of rising regulatory costs and
other headwinds.

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