Determined to lessen their reliance on the often-controversial offshore private banking market, UBS and Credit Suisse (CS) continue to invest heavily in onshore private banking in Europe.
These onshore operations are posting cost:income ratios of well over 200 percent - meaning that they are significantly loss-making.
Such is the fervour with which the two big Swiss banks treat onshore Europe, that UBS may continue to lose money in this segment up to 2010. CS may do a little better, turning its onshore Europe operation around by 2006, new research made available to PBI suggests.
Apart from running a chronically loss-making operation, UBS could be facing other dangers - reminiscent of its badly-implemented merger with Swiss Banking Corporation seven years ago. For the bank appears to be using its highly profitable offshore banking business as a cash-cow while CS seems to be paying the better salaries and bonuses to its offshore relationship managers.
UBS management could thus be assuming client loyalty to its brand will overcome any staff unhappiness and personnel turnover caused by stingy pay packages. As a result, it could be making itself vulnerable to the same traumas that were experienced after the unhappy merger between UBS and Swiss Banking Corporation in 1997, when the group experienced massively disruptive staff and client defection.
Source: Lafferty Private Banker
