Swiss Banks storm east

Swiss wealth managers are hoping that Asia can breathe life into an industry that has been battered by recent asset erosion and tax-evasion scandals. The flow of offshore assets, especially from the United States, is dwindling away, but offshore banks are well positioned to take advantage of the fastest growing wealth market in the world.

The Swiss private banking industry had already begun to shift its focus to onshore activities in prosperous regions before it had felt the full force of the US and European assault on tax havens.

UBS pulled out of offshore banking from the US after losing a lawsuit brought by the Internal Revenue Service (IRS) while other Swiss banks have either followed suit or reduced their activities.

But UBS chief executive Oswald Grübel recently told the Wall Street Journal that lost revenues "can be made up over time through emerging markets, in Asia and the Middle East."

Despite having lost its mantle as the world's leading wealth manager, according to researchers, UBS is dominantly placed in Asia, head and shoulders over its rivals. Singapore-based fund manager Calamander Group estimates that UBS holds $100 billion (SFr104 billion) of the $640 billion in wealth managed by private banks in the Asia Pacific region. Credit Suisse comes fourth in the list with $50 billion in assets.

And there appears to be plenty more wealth on the horizon despite assets taking a huge hit in the recent financial crisis. The Boston Consulting Group believes the region will generate 9.5 per cent per annum growth for the next five years compared to a global wealth creation average of four per cent.

An annual report by Merrill Lynch bank together with consultancy group Capgemini predicts that Asian millionaires will hold more wealth than their European counterparts by 2012. Asia has advantages over wealth rivals such as Russia, the Middle East and Brazil, according to Calamander Group chairman Roman Scott.

"Asia-Pacific has a much larger demographic base and a more diversified wealth base than commodities," he said. "This has been the place to be for the last six years. You must be looking at 50 to 60 per cent of future growth of the market situated in the region."

Observers also predict that much of the wealth currently managed in Europe or the US will return to Asia as assets pass to the next generation and locally based banks gain in stature. The financial hubs of Singapore and Hong Kong are the likely beneficiaries of this trend. Bankers in the region are keen to refute fears that the region will also attract illicit funds from tax dodgers who have been flushed out of other havens.

Singapore has been busy negotiating new tax treaties with other countries and expects to be removed from the Organisation for Economic Cooperation and Development (OECD) grey list by the end of the year. Hong Kong has so far proved more reticent to bow to the international tax crusade. But local bankers hope the Chinese territory will soon reform.

Recovery 'in evidence in financial services'

The UK's financial services sector is starting to show signs of recovery, a new report has concluded.

According to the Confederation of British Industry (CBI), the industry witnessed an expansion of business volumes during the quarter to early September.

This followed declines for nearly two years and the increased activity is "concrete evidence" of improvement, although business levels are still "below normal".

"Signs of a brighter outlook are appearing in the financial services sector," CBI chief economic adviser Ian McCafferty remarked.

However, he stressed that levels still remain well down and future demand is an ongoing concern.

The CBI study was conducted in association with PricewaterhouseCoopers and found that 32 per cent of enterprises polled saw business activity increase over the three months in question, compared with 24 per cent seeing a decline.