After devastating losses, Switzerland’s top banks are getting out of speculative investing and back into client service, Hui Min Neo reports for AFP.
Swiss bankers are going back to the basics of cosy and discreet relationships with their clients after disastrous forays into the brash and boastful world of American investment banking, analysts say.
However, the Swiss banking flagships could still be in for a rocky ride this year amid unsettled financial markets and a deepening global economic crisis. To the dismay of Switzerland, the biggest bank UBS this week posted annual losses for 2008 reaching almost 20 billion francs (17 billion dollars, 13 billion euros) — the largest in the country’s corporate history. Meanwhile the second biggest bank, Credit Suisse, lost 8.2 billion, its worst on record.
Both blamed their investment bank units for the damage, and both are aggressively cutting back on those divisions.
At the same time, UBS said it would now refocus “on its Swiss core business, on the large scale and strengths of its international wealth management franchise in Switzerland and on the growth potential of its onshore business globally.” While most of the 5,300 job cuts at Credit Suisse would come from investment bank, the group said it added 340 wealth management “relationship” managers in 2008. “Basically what they are saying is that we are going to go back to the core business of wealth management for international clients and retail banking within Switzerland,” said Arturo Bris, a finance professor at the Swiss business school IMD.
This is a natural evolution after setbacks. It’s an inevitable cycle: large corporations of every type tend to expand well beyond their core competencies during flush times and retrench when this inevitably blows up in their faces.
James Joyner is managing editor of the Atlantic Council.