Switzerland is renowned for its impressive mountains. Another mountain made of assets under management at Swiss banks grew last year due to a combination of favorable developments. But what's next?
The combination of strong new money inflows and favorable market conditions resulted in a very good year for assets under management (AuM) at Swiss banks, a finews.com review of the results of 25 institutions shows.
One of the drivers was low, in some cases negative, interest rates which prompted investors to put even more funds into equities, helping drive valuations to stratospheric heights.
Simultaneously, many clients parked their assets in top-tier Swiss financial institutions, including private banks where partners’ money is also on the line.
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Last year's strong economic performance also led to companies performing well which paid off in the form of higher stock market valuations. Even the specter of looming inflation was taken with a grain of salt and viewed in the context of it being of a temporary nature. Taken together, these developments led to higher new money inflows into banks, massively boosting assets under management.
Top Two
Not surprisingly, UBS was (again) the largest asset manager with $3.1 trillion under management, more than twice the $1.6 trillion francs at second-placed Credit Suisse.
Because of the Greensill Capital and Archegos Capital Management scandals, Credit Suisse suffered horrendous losses and damage to its reputation last year, which limited new money inflows. Particularly in Asian growth markets.
Uncertainty and Opportunity
There are clearly strong signals this year that the sky is no longer the limit. Inflation is no longer being viewed as transitory as it was last year, and of course, the war in Ukraine has deeply shaken financial markets.
Central banks have started to raise interest rates and are signaling there are more to come in order to tame inflation. Coupled with a slowing global economy, conditions for a sustained increase in share and asset prices are not as favorable as they were last year.
Change Also Brings Opportunity
Stock market volatility is currently very high and will help boost trading income, but 2022 is likely to go down in the annals of financial history as a year of change. But change also brings opportunity, and it is up to the banks to use that to write the next chapter.
