Last year proved to be a remarkable period for Swiss private banks, as they reveled in impressive results bolstered by favorable financial markets and substantial net new money inflows. This surge in assets under management (AuM) occurred amid a backdrop of shrinking institutions.
A recent study by consultancy PwC reveals that in 2024, all segments of Swiss and Liechtenstein private banks enjoyed double-digit growth in their assets under management. PwC’s analysis covered 74 banks, categorizing them into small (AuM 50 billion francs).
So what fueled this growth? It was a combination of robust markets and an uptick in investor confidence, particularly in the United States. All banks reaped the benefits of favorable market shifts, with several even hitting record highs in client assets. This wave of market confidence also spurred strong net new money inflows.
In a notable twist, while large private banks collectively surpassed the 3 trillion francs mark with a total of 3,025 billion francs, their contribution to overall net new money growth was relatively tepid at just 2.2 percent. In contrast, their smaller and mid-sized counterparts showcased impressive inflow rates of 4.5 percent and 4.9 percent, respectively.
PwC attributes the standout performance of specific banks to their consistent strategic execution, successful client transitions from major competitors, sharp business positioning, and targeted geographical strategies. However, PwC cautions that early market turbulence in 2025 may cloud these promising figures.
Looking ahead, while private banks are likely to continue attracting net new money, PwC anticipates a moderation in inflow rates due to intensifying competition. 2024 marked a pivotal moment as interest income, which surged in 2023 due to rising interest rates, began to decline by March 2024, putting pressure on margins.
The traditionally strong revenue driver for private banks—fee- and commission-based income (Net Fee and Commission Income, NFCI)—has returned to the forefront. NFCI margins on assets held steady, and overall NFCI saw an increase of 7-9 percent across all peer groups, helping to compensate for lower interest income.
An average look over three years reveals that client deposits constituted about 16 percent of AuM at small banks, 11 percent at mid-sized banks, and 10 percent at large ones. This dependency on interest income is underscored by loan exposure, with loans typically representing 8 percent of volumes at small and mid-sized banks and 5 percent at large institutions.
Since 2022, NFCI margins have flattened, reflecting heightened price sensitivity among clients and fierce competition. The industry also faces structural challenges: increased IT expenditures, shifting client expectations, ongoing digitalization, and new regulatory demands are putting traditional business models to the test and driving up operational costs.
The landscape of wealth management banks has shrunk dramatically, dropping from over 150 to fewer than 90 in recent years, with expectations that it may soon dip below 60. Yet, this consolidation isn’t all doom and gloom. PwC suggests that “fewer but stronger banks will shape the market,” as those that remain are proving their adaptability in this ever-evolving environment.
Which sectors of Swiss private banks saw the most growth in assets last year? All customer segments, including small, mid-sized, and large banks, recorded double-digit growth in assets under management.
What was a key factor driving net new money inflows in 2024? Investor optimism, particularly in the U.S., alongside positive market developments, greatly contributed to net new money inflows.
What challenges do private banks face heading into 2025? Intensifying competition and declining interest margins pose significant challenges, with higher operational costs further complicating traditional business models.
