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Falcon Private Bank widened its losses last year, according to its annual report seen by finews.asia. The remedy sounds simple: slashing spending.

The Zurich-based wealth manager's annual figures, seen by finews.asia, are a testament to the downward spiral it has been attempting to escape: Falcon's revenue is falling, and it is behind on cost-cutting.

Its annual loss stood at 31.8 million Swiss francs ($31.5 million), the third net loss in a row for a bank which was hit hard in 2016 by the 1MDB scandal. Falcon subsequently reviewed its strategy and is staging a reinvention as a crypto wealth manager.

A Year to Forget

The loss last year represents a deepening of 3.4 million francs on the year. Income tumbled by more than 40 percent to 43 million francs. Falcon couldn't cut its costs fast enough to offset the drop: it still spent 89 million francs, which is 14 percent less than in 2017. 

More worryingly, Falcon is bleeding money: its assets fell below the 10 billion franc threshold; those managed on behalf of clients slid to 7.8 billion francs. The bank lost 2.1 billion francs to withdrawals, and another 600,000 francs due to market swings. To be sure, Falcon abandoned some markets as well as clients last year as part of its strategy.

Costs Remain Elevated

Falcon suffered a painful exodus of private bankers last year, which led to the asset and revenue drop. At year-end, Falcon employed 246 people, which is 60 less than in 2017. The reduction didn't entirely feed through: spending on staff edged just 8 million francs lower to 53 million francs.

Against the backdrop of a third consecutive loss, it isn't surprising that Falcon finds itself in the midst of merger talk yet again. Its Abu Dhabi owner, Mubadala, purportedly wants to draw a line under the 1MDB scandal, to which former executives of the sovereign wealth fund are tied.

Paralyzed for Months

Abu Dhabi as majority shareholder is a double-edged sword for Falcon CEO Martin Keller. The fund has been generous about reviving the bank by pumping in fresh capital (128 million francs two years ago). At the same time, the emirate left Falcon in the dark about its plans or commitment for much of last year – a toxic set-up in wealth management, which is built on stability.

Falcon was paralyzed for months as a result and suffered an exodus of key bankers including finance boss Urs Zgraggen, trading head Ivo Sauter, tech chief Mathias Studach and chief lawyer Sibil Melliger, as well as its most important private banker, Daniel Christen.

Planning to Be Different

Presumably out of pride, Abu Dhabi in the autumn decided to publicly back Falcon. The bank hired Matteo Maccio as its new CFO, and got emirate stalwart Alastair Fiddes as operating chief. This year, Placido Albanese joined as advisory chief.