The Swiss Banking Institute, a department of the University of Zurich has published its biennial Private Banking Survey. The report, co-authored by Dr Teodoro Cocca and Dr Hans Geiger, is based on analysis of 253 institutions focusing on private banking from 11 countries and looks at data from 1990 to 2006. 2,176 in-house funds were also analysed. On the whole the news is pretty up-beat. When compared to 2004, cost/income ratios are down across the board and return on equity is up in every country surveyed, continuing the trend seen since 2002. The larger players have increased their share of the market based on assets under management. The top 20 private banks now hold 16 per cent of the market up from 15.4 per cent in 2005. According to the survey, the biggest single player is UBS Global Wealth Management which has 4.3 per cent of the market – hardly a dominant position. Switzerland maintains an edge as the leading country for private banking with the highest adjusted return on equity and a fairly tight control on personnel costs which were surpassed by costs in the US for the first time in 2006. Revenue per employee grew for the fourth year in a row as it did in nearly every country, reflecting the strong market conditions of the past few years. Overall, Switzerland and Liechtenstein are tied in first place in the rankings based on financial metrics. Where the survey presents a rare insight is in its second section of research. Taking banks’ in-house funds as a proxy for their investment strategies, the survey attempts to report on the success of various private banks in managing client money. These returns are reported in bar charts that show the absolute returns over all investment fund categories for each bank, grouped by country. During 2006, no bank achieved a negative stock fund performance. The averages over all countries show that clients with stock funds received on average 7.02 per cent higher returns in comparison to a mixed investment fund portfolio. And last year, on average, banks outperformed their benchmark (0.65 per cent) and therefore managed to create sustainable value for their clients. In terms of investment performance there was no clear winning country although the Nordic countries put in a general strong showing. Switzerland was mid-range and the survey thus suggests that it is individual manager selection that is vital and the country of operation is probably not so important. The trend to mergers in the industry will be enhanced by the finding that size in terms of AuM has a direct correlation to profitability. In particular the survey reports three facts: • The relative and absolute performance of investment funds has a significant positive correlation with the growth of AuM. • Large banks appear to have better risk-adjusted returns over a long period. • A uniform picture of the relations between profitability, efficiency and performance can be discerned. So bigger banks with more expertise do better than the boutiques. Unless, of course, you are talking about THE boutique! No generalism is true, after all. And then towards the back of the report is a real nugget. The section “Focus Switzerland” provides a plethora of data on the Swiss market, including the AuM figures for banks that I have never known publish such figures before. The list of the top ten banks by AuM are shown below. .