Credit Suisse looks to lure super-rich…
The leap in assets at Credit Suisse’s private bank to a record high this year has been aided by a key plank of the bank’s new strategy: lending money to the worlds ultra-wealthy.
Switzerland’s second-biggest bank is trying to lure more rich customers by helping them fund their businesses and lifestyles, with shipping, aviation and real estate loans a central focus.
The company has moved lending in those areas from its corporate bank to its wealth management unit, or private bank, over the past two years; the switch is one way in which Chief Executive Tidjane Thiam aims to deliver on his overarching strategy of driving group growth by expanding wealth management.
It is also one reason why Credit Suisse’s private bank is growing faster than that of its Swiss rival UBS, the world’s largest wealth manager, in terms of revenue and attracting new money.
Moving the financing from its corporate to private bank means that, in those sectors, Credit Suisse will now be primarily lending to affluent individuals – clients whose personal wealth it helps manage.
But there are risks with such exposure. Shipping finance in particular can be a perilous proposition due to doubts over the current profitability of many companies in the industry and whether lenders can make sufficient returns on investments.
Credit Suisse – bucking a trend of banks retreating from shipping – believes it can reduce its vulnerability by lending to the high-net worth individuals who control firms, often millionaire or billionaire tycoons, according to finance experts.
The tactic nevertheless represents a calculated gamble, they said, because these people’s personal wealth are often linked to the fortunes of the industry.
“From the bank’s point of view, the deposits and private wealth product is the juice; the value to the bank has to be strong enough in order to consider making risky loans,” said Basil Karatzas of New York based shipping finance advisory firm Karatzas Marine Advisors & Co.
Credit Suisse declined to give details about its loan exposure in shipping, aviation and property, but finance sources estimated Credit Suisse’s exposure in shipping alone was at least $12 billion. Credit Suisse’s total net private banking loans totalled about 110 billion Swiss francs ($110 billion) at the end of the third quarter.