Strategy

Petro-Dollars Fuel Swiss Private Banking Boom

Contributing Editor, 4 November 2005

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Swiss private banks are benefiting from a surge in money from the oil-rich Middle East, according to a study by HSBC. The study, entitle...

Swiss private banks are benefiting from a surge in money from the oil-rich Middle East, according to a study by HSBC.

The study, entitled “It is the return of the pink Rolls-Royce”, said oil money in the Middle East, Russia and Latin America is creating what it calls, “petro-private banking”. The bank forecasts the boom will last well into the next decade.

“The impact of oil receipts on the accumulation of the regional money in the Middle East, Russia and Latin America, during the next five, ten, twenty years, will be considerable,” the report said.

The incremental share of the oil profits from these areas, i.e. related to the additional incomes drawn from the rise of oil prices, is estimated by HSBC at $211 billion dollars in 2005 and $333 billion in 2025.

HSBC calculates that mainly Swiss private banks will manage to collect around 15 per cent of this rise, which amounts to $32 billion in 2005, and $50 billion in 2025.

On this realistic assumption, said the bank, the assets likely to land in Swiss private banks will grow exponentially, passing from $32 billion in 2005 to $794 billion in 2025.

Swiss banks have already seen the surge of petrodollars, according to HSBC. Geneva-based private banks said recently they expect stronger growth in both profitability and assets under management this year because of increased requests from customers of the Middle East.

UBS is likely to be the biggest beneficiary, because its size and the ability to acquire clients in these oil-rich countries. Credit Suisse should do particularly well in Russia, according to the report, because of its early presence in the country post-perestroika.

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