A poor showing in global markets this year has battered wealth managers which saw the top three leaders alone lose assets equivalent to that of a top 10 private bank in the region. finews.asia reviews the industry’s performance in the first half.

2022 has been a challenging year for global markets with volatility felt across equities and fixed income. US stocks posted their worst first half in 50 years. Emerging markets are feeling the drag of interest rate hikes. increasing inflation and slowing growth. China continues to appear in the headlines over regulatory uncertainties, property worries, geopolitical tensions and Covid-linked disruptions.

This has not resulted in a conducive environment for wealth managers to perform effectively, especially at universal banks that heavily rely on public markets for business. While most continued to post positive inflows – a sign of persistently strong wealth generation in the region – weakened sentiments and negative market movements overwhelmed, erasing billions of dollars of assets under management (AUM).

A Top 10 Bank Lost

In the first half, UBS Global Wealth Management was the top loser in AUM. Although it retains the top rank in Asia with $460 billion in AUM, the Swiss private bank saw $61 billion of client assets evaporate in the period. Runner-up, Credit Suisse, lost 13.9 billion Swiss francs ($14.5 billion) while the region’s third largest, HSBC, lost $11 billion. 

AUM losses at the top three leaders totaled $86.5 billion in the first half – equivalent to a top 10 private bank in Asia, according to finews.asia’s 2021 AUM League Table. 

The results were similar at fifth-ranked Julius Baer which was impacted by de-risking and deleveraging in Asia, according to its first half statement. Although the bank does not break down its assets by the source of wealth, it reported that AUM for Asia-domiciled clients fell 14 billion francs to around 111.3 billion francs which it attributed to the significant correction in global stocks and bonds. 

Lower Profits

Weak market performance and outlook also impacted client activities which resulted in lower wealth management income and profits across the board.  

HSBC’s wealth and personal banking (WPB) unit in Asia, which covers clients segments ranging from retail to private banking, posted $1.7 billion in pre-tax profit for the first half, down 32 percent. OCBC's wealth management business, which includes insurance, private banking, affluent banking, asset management and stockbroking, saw income fall 22 percent to S$537 million ($390 million) in the same period.

At UBS, its Asian wealth unit recorded $239 million in pre-tax profit for the second quarter, down 16 percent year-on-year. The contrast is even sharper when combined with the 38 percent plunge in pre-tax profit of $288 million for the first quarter.

Not All Bad News

Despite lower assets, income and profits, it wasn’t all bad news for wealth managers in Asia. While persistent Covid-related restrictions have limited travel and face-to-face client meetings, many managed to capitalize on wealth generation in the region with positive asset flows.

In the first six months of 2022, Credit Suisse’s wealth arm recorded positive net new money of 4.8 billion francs, up from a 900 million franc outflow in the same period last year. HSBC’s WPB unit posted net new invested assets of $22 billion in the first half while UBS registered $3.3 billion of net new fee-generating assets in the second quarter and $400 million in the first quarter.

And when clients are ready to add risk again, wealth managers will also benefit from an improved lending environment as net interest margins feel the tailwinds of rising rates.