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SWITZERLAND: Credit Suisse's strategy to attract the world’s ultra-wealthy

posted onNovember 6, 2017

Zurich-based Credit Suisse, is trying to attract more high-net worth individuals by offering them shipping, aviation and real estate loans according to a news report in Reuters. Switzerland’s second-biggest bank, has moved lending in those areas from its corporate bank to its wealth management unit over the past two years.The switch is one of the reasons why Credit Suisse’s private bank is growing faster than that of its Swiss rival UBS, in terms of revenue and attracting new money.

Credit Suisse saw a 7 percent rise in net new money in the first nine months of 2017 while its earnings from lending in wealth management have risen 5.8 percent this year. By comparison, UBS’s flagship wealth management division, reported a 5 percent growth in net new money while earnings from lending in wealth management were down 1 percent.

However, moving the financing from its corporate to private bank means that there are risks with such exposure. Shipping finance in particular can be risky due to doubts over the current profitability of many companies in an industry which is struggling with a near decade-long slump caused by too many vessels ordered and weaker demand. Credit Suisse declined to comment on the shipping loans figure but finance sources estimated the bank's exposure was at least $12 billion.

According to a source familiar with the matter Credit Suisse had not seen any significant losses on shipping loans and that such lending gave it the opportunity to bank for wealthy families, which run major shipping companies.

Asked about the financing switch to the private bank and the associated risks, a Credit Suisse spokeswoman said such lending was part of its overall wealth platform and that the bank considers “franchise value when engaging holistically with wealth management clients”. Credit Suisse has taken a similar approach towards aviation and real estate. It remains to be seen whether the potential benefits of the bank's new strategy will outweigh the risks Reuters concluded.