The private banking division of Credit Suisse, which includes the global wealth management clients and corporate and institutional clients business, said pre-tax income in the second quarter dropped by 7 per cent year-on-year to SFr874 million (around $832.5 million).

Stable revenues of SFr2.99 billion were more than offset, the Zurich-listed bank said, by a 9 per cent increase in operating expenses.

Private banking recorded net new assets of SFr13.8 billion in the second quarter, benefiting especially from strong inflows in the international businesses, Credit Suisse said in a statement today.

The wealth management clients business reported income before taxes of SFr633 million in the second quarter, a drop of 17 per cent from the same quarter of last year. Net revenues held steady at SFr2.516 billion. Recurring revenues were higher, driven by an increase in recurring commissions and fees and higher net interest income. This was offset by a decrease in transaction-based revenues, which was primarily due to significantly lower integrated solutions revenues compared to a strong second quarter in 2009.

The gross margin on assets under management was 120 basis points, a fall of 15 basis points compared to 2Q 2009, as average assets under management increased 12.8 per cent and net revenues remained stable.

As reported yesterday, margins at rival Swiss private bank Julius Baer have also contracted. McKinsey, the consultancy, has argued that shrinking margins have been a recent feature of the wealth management industry around the world, raising the likelihood of consolidation and restructuring.

Of the private banking’s total net new assets, the wealth management clients business contributed SFr11.9 billion, corresponding to an annualized net new asset growth rate of 5.8 per cent.

Across the whole of the Swiss bank, the group reported second quarter net income attributable to shareholders of SFr1.593 billion, compared with SFr1.571 billion a year ago, or up by 1 per cent.

“This was a resilient performance during a difficult second quarter for the banking sector. The continued strong flow of net new assets we achieved in private banking and our market share momentum, particularly in investment banking and in our Swiss institutional business, reflect the strength of our franchise,” said Brady Dougan, chief executive at Credit Suisse.

At the end of the quarter, the bank had a Tier 1 capital ratio of 16.3 per cent, up from 15.5 per cent.

Assets under management stood at SFr1.242 trillion, up from SFr1.175 trillion a year before, the bank added.