An extensive revamp last year pushed Rothschild & Co's profits lower. The wealth manager is shedding for growth.
The Zurich-based private bank – part of the wider Rothschild & Co group – underwent massive change last year: it wrapped up the sale of its trust business, shut an office in Hong Kong office, merged the Genevan subsidiary Equitas, and appointed a new chairman in Gary Powell.
As Powell wrote in a letter to investors, Rothschild's reinvention weighed on its profit last year. Even after stripping out the windfall from selling its trust arm, operating profit fell by one-third to 18.4 million Swiss francs ($20 million).
Retreat from Hong Kong
Besides the one-off expenses linked to the changes, the results included higher spending on personnel. Additional private bankers hired last year will translate to net new money, the bank said.
Last year, the bank took in 429 million in new money – or just over 2 percent of assets under management. The bank manages a total 0f 36.2 billion on behalf of clients. Its retreat from Hong Kong is emblematic of «size matters»: the bank clearly found business in Asia too costly compared to the potential payoff.
Checkered Past
The size of the bank lays bare the rising cost of regulatory requirements, as the introduction of its new technology system illustrates. The bank invested in strengthening its compliance as well as investment capabilities last year, Powell wrote.
The issue is a touchy one for Rothschild: the since-disposed of trust arm was ensnared in the 1MDB scandal via alleged linchpin Jho Low. The bank was reprimanded by Swiss financial overseer Finma two years ago; shortly afterward, it sold the trust arm.
