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Summary Of Full-Year 2012 Financial Results For Private Banks
Tom Burroughes
11 March 2013
Here is a summary of the results for the fourth quarter, and full-year, of
2012 for the world’s major wealth management firms. Not all of the institutions
here are strictly comparable, so the results need to be interpreted with that
point in mind. Some of the figures may, for various reasons, be subsequently
revised. UBS Pre-tax operating profits at the wealth management arms fell
in the fourth quarter of 2012 from the previous three-month period, while the
firm overall reported a loss in the quarter but a full-year adjusted profit of
SFr3.0 billion ($3.29 billion). The quarterly loss had been expected after UBS in December
last year was fined a total of more than $1.5 billion to settle charges of
LIBOR interbank rate manipulation.The Q4 pre-tax loss was SFr1.823 billion,
albeit narrower than the Q3 loss of SFr2.529 billion. The loss was primarily
due to net charges for provisions for litigation, regulatory and similar
matters of SFr2.081 billion as well as net restructuring charges of SFr258
million and an own credit loss on financial liabilities designated at fair
value of SFr414 million. For the whole of 2012, the wealth management businesses’
full-year net new money rose by SFr11.3 billion to SFr46.9 billion. As far as
the whole of 2012 is concerned, USB logged an adjusted pre-tax profit of SFr2.1
billion in wealth management and SFr813 million in Wealth Management Americas. Credit Suisse The private banking and wealth management arm of Credit
Suisse logged pre-tax income of SFr911 million (around $1.0 billion) in the fourth
quarter of 2012, up sharply from SFr532 million a year before. Net revenues in
this business segment, at SFr3.334 billion in Q4, were stable from the previous
quarter of last year, reflecting a “significant” rise in transaction and
performance-based revenues, offset by declines in other revenue sources, the
bank said in a statement. Net interest income and recurring commissions and
fees were flat. Pre-tax income among the wealth management clients unit was
SFr490 million, down 2 per cent on the previous quarter; net revenues were
stable at SFr2.209 billion. On the asset management side, pre-tax income fell
18 per cent quarter-on-quarter to SFr183 million. There were net new assets in
the private and wealth management arm of SFr6.8 billion in Q4, with wealth
management clients contributing net new assets of SFr2.9 billion, particularly
from emerging markets and from the ultra high net worth individual client
segment, partially offset by outflows in Western Europe. Julius Baer Assets under management at the end of 2012 hit a record of
SFr189 billion ($296.8 billion), a rise of 11 per cent over the previous 12
months as a result of stronger markets, SFr9.7 billion of net inflows and a
slightly negative currency effect. The Zurich-listed bank reported on its full-year figures for
2012 after announcing it had started the process of transferring assets
acquired from the non-US wealth business it had acquired from Bank of America
Merrill Lynch. Total assets under management, including assets under custody,
rose by 7 per cent to SFr277 billion, it said in a statement. Operating income
decreased by 1 per cent year-on-year to SFr1.737 billion, while average assets
under management rose 8 per cent, resulting in a gross margin of 96 basis
points (2011: 105bps). The lower gross margin was a direct consequence of a
further reduction in client activity. Adjusted operating expenses fell by 5 per cent to SFr1.216
billion as the expenses in 2011 included the one-off tax-related Germany payment
of €50 million (SFr 65 million). Excluding the 2011 Germany payment, the adjusted
operating expenses were flat. The bank said its adjusted cost/income ratio rose
to 71 per cent (2011: 68 per cent). Vontobel Client assets stood at SFr150 billion ($164 billion) at the
end of 2012, a 14 per cent rise, while it logged net inflows of new money of
SFr8.6 billion, a year-on-year gain from 2011 when inflows were SFr8.2 billion.
Net profit rose by 15 per cent year-on-year to SFr130.6 million, a result that
the bank said was achieved despite “very low trading volumes on the capital
markets and significant caution on the part of private clients”. The wealth and
asset management businesses accounted for 67 per cent of the group’s pre-tax
profit. At the end of last year, Vontobel had a BIS tier 1 capital ratio of
27.2 per cent. EFG International The Zurich-listed firm logged an underlying net profit of
SFr142.5 million ($152.9 million) for 2012, a 71 per cent year-on-year
increase, while its operating income rose 8 per cent to SFr824.6 million. Its cost-income
ratio fell from 91.6 per cent in 2011 to 79.2 per cent. Revenue-generating
assets under management stood at SFr78.7 billion at end-2012, up from SFr78.4
billion a year before; the firm logged net new assets of SFr3 billion, up from
SFr600 million. At the end of last year, EFG International had a BIS capital
ratio of 18.1 per cent, up from 12.9 per cent a year before. Deutsche Bank Impairments at the asset and wealth management arm of the
bank meant the AWM unit logged a pre-tax loss in the final three months of 2012
of €260 million ($352.5 million), contrasting with income of €211 million a
year before. The Frankfurt-listed bank’s AWM arm reported net revenues of €1.1
billion in the fourth quarter, down from €1.272 billion in the same period last
year. The cost-income ratio of this division surged to 123 per cent in Q4, up
from 81 per cent a year earlier. Non-interest expenses rose by €403 million, or
42 per cent, compared to a year before, mainly driven by Scudder-related
impairments of €202 million, IT-related impairments of €90 million as well as
litigation related charges, partly offset by the aforementioned effects related
to Abbey Life. In the private and business clients (PBC) unit, pre-tax income
was €287 million, down from €325 million a year before. Net revenues fell to
€2.403 billion from €2.578 billion a year earlier. BNP Paribas Assets under management at the investment solutions arm of
BNP Paribas, the division including wealth management, stood at €889 billion
($1.378 trillion) at the end of 2012, a 5.6 per cent rise from the year before,
as stronger financial markets pushed the figures higher. Within wealth
management in particular, the Paris-listed firm said there were good inflows in
domestic markets and in Asia in particular.
Wealth management accounted for €265 billion of AuM at the end of last year, a
gain of 8.6 per cent. Revenues in the wealth and asset management division
stood at €6.204 billion in 2012, a 4.8 per cent increase year-on-year. Pre-tax
income in this division was €2.098 billion, a gain of 16.3 per cent
year-on-year. For the whole of BNP Paribas pre-tax net income was €10.372
billion in 2012, a gain of 7.5 per cent from the previous year; net income
attributable to equity holders was €6.553 billion, up 8.3 per cent. Looking ahead to strategy for this year, the French firm
said its aims for the wealth and investment unit included a focus on ultra high
net worth individuals in the private banking area. Societe Generale The private banking arm of Societe Generale logged a 1.5 per
cent rise in assets under management at the end of December 2012, compared with
a year before, with AuM standing at €86.1 billion (around $115.8 billion). The
rise in assets included an inflow of €1.0 billion, a market effect of €2.6
billion, a negative foreign exchange impact of €400 million and a negative
”structure” effect of €2.0 billion. Against a backdrop of deleveraging,
partially offset by margins holding up well, the business line’s revenues fell
by 2.4 per cent year-on-year to €757 million. Operating expenses declined by
-1.3 per cent to €624 million amid cost-saving measures. ING Group The firm reported an underlying net profit of €2.603 billion
(around $3.511 billion) for 2012. This is down by 5.2 per cent on 2011. Barclays The wealth and investment management division of UK-listed
Barclays logged an adjusted pre-tax profit of £115 million ($180 million) in
the fourth quarter of 2012, almost double the level in the same three months of
2011, at £60 million. Barclays said it logged total income of £1.815 billion
for the whole of 2012, a 4 per cent year-on-year gain; profit before tax for
2012 was £315 million, up by 52 per cent. The cost/income ratio of this
division was 81 per cent at the end of December last year, down from 86 per
cent a year before. Client assets rose by 13 per cent to £186 billion at the
end of last year from £164.2 billion at the end of 2011, mainly driven by net
new assets in high net worth businesses. “This is another strong and pleasing set of results, which
builds on the consistent trend established since the launch of our strategic
investment programme, Gamma, in 2010. In
particular, the 13 per cent increase in client assets is indicative of the
growing strength of our franchise, particularly in our global high net worth
businesses, which have been the focus of our investment," Tom Kalaris, CEO
of the division, said in a statement. Barclays had a Core Tier 1 ratio, as
measured under the Basel bank capital rules, of 10.9 per cent at the end of
last year. Lloyds Banking Group The wealth business logged an underlying profit of £358
million ($542 million) in 2012, up from £287 million a year earlier. The wealth
business forms part of the wealth, asset finance and international arm at the
bank. This division reported an underlying loss of £929 million in 2012, but
this was far narrower than the £2.785 billion loss recorded a year before. Net
interest income at this division of the bank was £799 million in 2012, it said
in a statement today, compared with £1.0 billion in 2011. Royal Bank of Scotland The wealth management arm, which includes its flagship
Coutts brand, reported an operating profit, before impairments, of £299 million
($453 million) last year, up from £273 million a year before. This part of RBS
also reported impairment losses of £46 million, up from £25 million; total
income over 2012 was £1.17 billion, up from £1.104 billion. The net interest
margin was 3.73 per cent, up from 3.23 per cent. HSBC Pre-tax profits at the global private bank of HSBC rose by 7
per cent year-on-year to $1.01 billion, while this unit logged net operating
income, before impairments, of $3.172 billion, down from $3.292 billion a year
ago. On a constant currency basis, HSBC later told this publication, pre-tax
profits rose by 8 per cent from 2011. Standard Chartered Private banking income rose by 12 per cent with around 4,000
new client accounts. The firm, which at the time of this publication’s press
deadline gave few other details about its private bank, said the “high value
segments” of the firm accounted for 46 per cent of group consumer banking
income and 57 per cent of consumer banking income growth last year. Schroders Subdued market activity and some business outflows reduced
net revenues at the private banking arm of the firm. Net revenue declined 17
per cent last year from 2011 to stand at £94.4 million ($141.7 million). The
firm said that private banking net revenue was also affected by a further £7.9
million of loans losses on previously impaired loans, principally caused by the
continued weakness in commercial property. Private banking pre-tax profit was £11.8 million, down from
£23.8 million in 2011. Costs fell by 9 per cent year-on-year to £82.6 million. Bank of America The firm’s global wealth and investment management division
said net income for the final three months of 2012 rose sharply to $578
million, up from $272 million on the same period in 2011, while total revenues,
net of interest costs, rose to $4.194 billion, up from $3.943 billion. The US banking and
investment group, which has spun off its non-US wealth management arm to Swiss
private bank Julius Baer, said client balances rose by 7 per cent to $2.17
trillion, driven by higher market levels and net inflows, driven by client
activity in long-term AuM, deposits and loans. Assets under management rose $62.5 billion from the fourth
quarter of 2011 to $698.1 billion, driven by higher market levels and long-term
asset flows. As far as results for all business divisions were concerned, BoA
reported net income of $700 million, or $0.03 per diluted share, for the fourth
quarter of 2012, compared to $2.0 billion, or $0.15 per diluted share in the year-ago
period. Revenue, net of interest expense and on a fully taxable-equivalent
basis was $18.9 billion. Fourth-quarter 2012 revenue, net of interest expense, on an
FTE basis, excluding $0.7 billion of debit valuation and fair value option
adjustments, was $19.6 billion; excluding $3.0 billion of provisions for
representations and warranties and obligations related to mortgage insurance
rescissions related to settlement agreements with the Federal National Mortgage
Association (Fannie Mae), revenue net of interest expense, on an FTE basis, was
$22.6 billion. JP Morgan Revenue from JP Morgan’s Private Banking division was $1.4
billion for the fourth quarter 2012, up by 19 per cent from the prior year, and
flat compared to the previous quarter. Private banking is recorded under the
firm’s asset management division, which as a whole reported net income of $483
million for Q4, up from $302 million for the same quarter 2011. This was on net
revenue of $2.75 billion, compared to $2.28 billion in Q4 2011. In asset management, provision for credit losses fell
year-over-year from $24 million to $19 million in the final quarter, while
non-interest expense rose from $1.75 billion to $1.94 billion. The rise in
costs was due to performance-linked compensation and higher headcount.
Institutional business revenue made up $729 million within asset management and
retail made up $583 million, compared to the $1.4 billion from private banking
revenue. Assets under management ended the year at $1.4 trillion. For the full
year, net inflows were $60 billion to long-term products, offset by net
outflows of $43 billion from liquidity products. For the quarter, net inflows
were $32 billion reflecting net inflows of $24 billion to liquidity products
and net inflows of $8 billion to long-term products. Wells Fargo Net income at Wells Fargo’s wealth, brokerage and retirement
unit rose 13 per cent from $311 million in the final quarter of 2011 to $351
million at end-December, 2012. For the final quarter, net income at the wealth, brokerage
and retirement arm rose 4 per cent from $338 million, after the bank reported a
$5 million decline in its third quarter earnings release. Revenue ended 2012 at $3.1 billion, up by 2 per cent from fourth
quarter of 2011 and roughly flat for the quarter ended 31 December. However,
excluding $32 million in lower gains on deferred compensation plan investments,
revenue was up 3 per cent “largely due to higher asset-based fees.” The wealth,
brokerage and retirement division of Wells Fargo includes the Abbot Downing
unit, which serves ultra high net worth individuals and families. At
end-December, 2012, wealth management client assets stood at $204 billion, up 3
per cent on the prior year. Goldman Sachs Goldman Sachs reported net revenues of $34.16 billion and
net earnings of $7.48 billion for the year ended 31 December 2012, up from
$28.8 billion and $4.4 billion respectively. Fourth quarter net revenues were
$9.24 billion, up 11 per cent on the previous quarter and 53 per cent
year-over-year. Net earnings ended the quarter at $2.89 billion, 91 per cent
higher than at 30 September 2012 and up 185 per cent on the prior year. Net
revenues in investment management were $5.22 billion for 2012, 4 per cent higher
than 2011. This was due to “significantly higher” incentive fees, partially
offset by lower transaction revenues and slightly lower management and other
fees. Morgan Stanley The firm’s global wealth management group reported pre-tax
income from continuing operations of $581 million in the fourth quarter of
2012, more than double the figure of $238 million in the fourth quarter of
2011. The quarter's pre-tax margin was 17 per cent, the US-listed firm reported
late last Friday. Net revenues for the current quarter were $3.5 billion
compared with $3.2 billion a year ago. Income after the non-controlling
interest allocation to Citigroup and before taxes was $474 million. Asset management fee revenues of $1.9 billion increased 16
per cent on a year ago, primarily reflecting an increase in fee-based assets
and positive flows, Morgan Stanley said. Transactional revenues of $1.1 billion decreased 3 per cent
from a year before, reflecting reduced commissions and fees and a decrease in
principal trading revenues driven by lower gains from investments associated
with the firm's deferred compensation and co-investment plans, offset by higher
investment banking revenues. Total client assets were $1.8 trillion at the end of last
year. Client assets in fee-based accounts were $573 billion, or 32 per cent of
total client assets. Global fee-based asset flows for the fourth quarter were
$3.7 billion. BlackRock Assets under management hit a record of $3.792 trillion at
the end of 2012, a rise of 8 per cent from 2011, while the firm’s operating
income and margins improved. The firm, which among other services operates iShares, the
largest provider of exchange-traded funds, reported full year diluted earnings
per share of $13.79, up by 11 per cent from 2011. Revenues increased by 14 per
cent in the fourth quarter from the same three months of 2011 and by 9 per cent
from the previous three months of 2012, reflecting growth in markets, strength
in base fees and higher performance fees. DBS Group Net profit in 2012, including divestment gains of S$450
million ($363.7 million), reached S3.81 billion. When gains are excluded, the
bank's net profit rose to S$3.36 billion, a gain of 11 per cent from the
previous year. Return on equity before the divestment gains rose to 11.2 per cent,
the best in five years. Wealth management income rose 27 per cent year-on-year
to S$786 million. OCBC The bank - parent of Bank of Singapore - reported a 73 per
rise in net profit, after tax, in 2012 compared with the previous 12 months,
with wealth management and loan revenues helping drive the results. OCBC as a
group reported a net profit after tax of S$3.99 billion ($3.23 billion) for the
financial year ended 31 December 2012, from S$2.31 billion in 2011. Core net
profit after tax, which excludes gains from the divestment of non-core assets,
grew 24 per cent over the year to a record S$2.83 billion. The results were
driven by a combination of record net interest income, fee income and net
trading income, as well as significantly higher contributions from Great
Eastern Holdings.