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Diary of a Private Banker: For Coutts, everything ain't coming up roses
08/08/2014 , Freddie Pooter

Like some deadly form of financial Ebola, the corporate virus that has laid Barclays Wealth so low now threatens to spread to other hapless victims in private banking.

For we hear that the core body temperature at Coutts is rising steadily, and doctors are very concerned that multiple amputations may be necessary to save the patient. This would be a tragedy.

For since Barclays Wealth decided to take to the rest sanatorium and became the advisory industry’s very best Labour Exchange, Coutts has been the bank that has proudly flown the private banking flag for Britain - as rightly befits its enviable role as adviser to HRH at Buck House.

The industry rumour mill surrounding Coutts is going at full pelt, ever since Alison Rose, head of the new commercial and private banking division at RBS, started a review of the private bank. This is expected to be unveiled internally any time now and, by some accounts, the Rose review could be accompanied by the chainsaws.

La Rose may well decide that Coutts needs really radical pruning. Indeed, will all the overseas operations of Coutts, run out of Geneva by the admirable Alex Classen and on which the sun never sets, be grubbed out of the ground? Or will it be just a case that wilting branches like the unfashionable Swiss offshore business will be lopped off?

Or will the Asian private banking operation, also now unfashionable at many firms because the cost of doing business in Singapore et al just doesn’t justify the big expenditures, be judged to be too badly suffering from honey fungus?

Whatever the scale of horticultural holocaust, the bean-counters at RBS up in Edinburgh must comprehend that Coutts arguably has the best brand in all of private banking. To destroy this image and reputation in favour of a shrunken bank that parochially serves only its home base would seem, well, treasonable.

Why, not so long ago, HRH’s ancestors would have swiftly consigned such transgressors displaying such lèse-majesté to the Tower.

In fact, as banks far and wide reduce their private banking ambitions, are we seeing the emergence of UBS as the only truly global private banking power left in the industry?

It currently tops the client league tables with nearly $2 trillion of assets – a remarkable performance by a bank that at the height of the financial crisis needed to be bailed out by the Swiss government. True, American banks are also high in the rankings, but virtually all their business is US-based after Bank of America Merrill and Morgan Stanley sold off their international private banking businesses to Julius Baer and Credit Suisse respectively.

UBS has effortlessly pulled ahead of its home-grown rival Credit Suisse, which can command less than half of the client assets of its peer. Banks like RBC, BNP Paribas and Deutsche retain their appetite for international private banking but have less than a third of the assets of UBS and so are relative minnows.

In short, if UBS continues to grow at this rate, 15 percent or so annually, then it will effectively “own” the global private banking market.

What a remarkable turn-around this has proved. UBS announced in 2009 that it had lost nearly CHF 20 billion, the biggest single-year loss by any company in Swiss history. Since 2007, it has written down more than $50 billion from subprime mortgage obligations.

Then came the US regulatory inquisition, with UBS agreeing in 2009 to pay a fine of $780 million to the US government to settle a variety of tax evasion questions.

Much of the credit for this rebirth must go to CEO Segio Ermotti, a banker hitherto untested at the top of Swiss banking when he took over in 2011 (he was previously a senior executive at Italy’s UniCredit). Indeed, he has more than filled the shoes of his legendary predecessor, Ossie Gruebel.

Sergio bravely avoided the MBA route, and rather left school at age 15 after deciding to follow in the footsteps of his private banker father. He began his career as a young apprentice at the Corner Bank in Lugano.

As for this diarist, it must be admitted back in 2010 we joined in the general amusement at UBS’s adoption of a really naff turn-around slogan, “We will not rest....” This campaign, its marketing muppets asserted, “conveys the spirit of UBS at all communication levels: a tireless, relentless devotion to our clients.”

We joined in the general hilarity, which depicted the slogan as “mushy and unfocused.” In view of UBS’ remarkable performance, we can only now offer a humble apology to the Bahnofstrasse boys for our unwise rudeness.

Pip pip 

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