The Scorpio Partnership has produced its annual report on the state of the private banking industry, and it does not look good.
The fundamental problem is one of falling revenues and rising costs. In 2008, the average private banking cost income ratio was 72.4%, up from 63.7% the previous year.
This is leading to the suggestion that private banks might want to reduce headcount.
“A lot of money in private banks is spent on staff,” says Stephen Wall, a director at the Scorpio Partnership. “And a lot of chief executives in private banks don’t appear to have the level of knowledge of costs and expenditures that you'd expect from other industries.”
Banks like UBS and Citi are already trimming headcount in their private banks. Others are still merrily adding.
Barclays Wealth, for example, has been picking up disaffected UBS bankers and aspires to increase its AsiaPac headcount by 5%.
However, the Scorpio Partnership’s report suggests that the days of big private bank recruitment are now over: the industry expanded headcount by 6% last year and has little to show for it.
“I can't see any bank in the present climate taking on people who don't add to the bottom line,” says Simon Johnson, a private banking specialist at search firm Hutton Consulting.