EFG private bank is reducing costs in Switzerland, while expanding its business in Asia. Whether the strategy will work remains to be seen.
EFG on Monday said it had to improve its profitability by cutting costs as earnings in the second half of 2015 would be lower than in the first six months. Joachim Straehle, in charge of the Zurich-based private bank since April, is doing away with 200 of the bank's 2,140 jobs, reducing costs by an annual 30 million francs by the end of 2016.
The bank in the first half of 2015 earned 48 million francs, less than expected. And net income will decline further in the second half, the bank warned yesterday.
Asia Spared From Cull
The guillotine isn't brought down across the board however, with Asia spared from the cull. Singapore and Hong Kong instead will receive additional firepower with new customer advisers, EFG Asia boss Albert Chiu told the «Asian Private Banker» (by subscription only) on Tuesday.
Chiu will hire at least seven new people in the three months through December. EFG Hong Kong employed Jessie Fan and Christopher Dou in October, joining the Swiss bank from CITIC Bank in China.
EFG expansionary strategy won't stop there though. The consolidation of the industry across the region presented EFG with opportunities to acquire suitable firm to strengthen its private banking business, Chiu told the online newspaper without providing more detail.
Hiring Top Bankers Is Costly
The bank may soon take the next step, having almost concluded the takeover of Falcon Private Bank in Hong Kong. In January 2014, the Swiss bought client assets amounting to about $800 million.
It is too early to say how sustainable the growth strategy of EFG will be as hiring customer advisers is a costly exercise. The profit growth EFG will expect by attracting talents from other institutes is also a source of doubt as banks have been able to increase their retention rate, a measure of how much customer assets they are able to keep despite the departure of the advisers.
Rivals Are Catching Up
EFG isn't alone out hunting for rich clients in Asia. UBS is the No. 1 with $270 billion, with Citi Private Bank a close second with $255 billion. The big international players have been joined by regional rivals, including DBS Bank of Singapore. DBS in 2014 increased assets under management to $73 billion from 54 billion a year earlier. EFG by comparison has 83 billion francs under management – globally.
Sources in the industry claim that EFG is too small to make the grade in the private-banking industry in the long run. They expect that it will need to look for a strong partner.
EFG is said to have been in talks with Julius Baer in spring, evaluating the possibility of a merger. The plan failed due to the refusal of the majority owners of EFG, the Latsis family. The family felt it wasn't best represented by its CEO John Williamson, according to a report by «Finanz und Wirtschaft» business newspaper (by subscription only).
