At No.1 Bahnhofstrasse in Zurich you will find a bank that most passers-by do not know: the discreet Union Bancaire Privée, which was founded in 1969 by the Lebanon-born Swiss banker Edgar de Picciotto, a pioneer in hedge funds. He headed the bank into old age and died in 2016.
His son, Guy de Picciotto, has successfully taken over the reins: last year, UBP increased its profits by 25% to CHF 220 million, and its assets under management to CHF 125 billion. “In the first half of this year we carried on growing, although not at the same speed,” explains Guy de Picciotto at our interview in Zurich. “We are reckoning with profit growth of around 10%.” The markets have become tougher, as has recently been seen in Italy. “That’s made our clients somewhat more cautious.”
220 staff in Zurich
UBP has expanded a lot in recent years thanks to a string of acquisitions, in particular in Zurich, which has become the bank’s second-largest location. Around 220 people work at 1 Bahnhofstrasse (which UBP owns), and in another building nearby, Adrian Künzi tells us.
He was previously head of the private bank Notenstein La Roche, which Raiffeisen recently sold to Vontobel. He moved over to UBP in March and is now in charge of the Zurich site, along with the Northern Europe Private Banking division. “In the last five years in Zurich, we succeeded in doubling the assets under management to CHF 27 billion,” says Künzi. This was, in particular, the result of the acquisition of Coutts International in 2015.
But there’s another Geneva bank on the block: Pictet is renovating the “Leuenhof” – the former headquarters of Bank Leu – and is moving in in 2020. It has hired the ex-head of Julius Baer, Boris Collardi, as a partner in an effort to grow its business in German-speaking Switzerland.
Are these signs of a general shift from Geneva to Zurich? “For certain functions, it’s easier to find the right people in Zurich,” explains Künzi. It is from Zurich that UBP manages not only its Germany and northern Europe markets, but also Eastern Europe and the Middle East, as well as the US for which a former Vontobel manager was taken on board this month. Asset management, tax and compliance experts are also present in Zurich. In the Global Financial Centres Index rankings, Zurich is in sixteenth place and Geneva in twenty-sixth – way behind London, New York, Hong Kong and Singapore.
Matters would be much easier if European clients could be managed from Switzerland. “What we really need is free access to the EU market,” de Picciotto says. “We’re an export industry and we’d like to be able to sell our ‘Swissness’, our experts and Switzerland as a booking centre abroad.” His colleague throws out some figures: “Two thirds of the private banking business is cross-border. Around half of that comes from Europe,” Künzi stresses. “A substantial part of our business is closely tied to Europe.” Being a realist, Guy de Picciotto does not believe that he is going to get unfettered access to the EU market any time soon. “That’s why we’re looking at other ways to manage our clients in the EU via our bank in Luxemburg,” the son of the firm’s founder states. The subsidiary has been present there since 2002, and in May Guy de Picciotto added to this with the acquisition of the small firm Banque Carnegie Luxembourg.
UBP runs several branches across the EU from that small European country. “This year, we are also opening a branch in Italy, Spain is in the pipeline, and France will probably follow,” the boss explains. “Without market access we’re forced to operate a significant part of our European business out of the Luxemburg booking centre.” He says Switzerland is still highly sought after by wealthy clients. “When European clients go to a Swiss bank today, they no longer have to justify this in their own country, as it’s no longer a question of tax advantages,” de Picciotto observes. In the era of the automatic exchange of information, taxes have become irrelevant. “Rather, clients come in order to diversify their investments and to minimise risk.” This is why wealthy families are seeking out a variety of locations, also outside Europe.
Federal Council reacted too late
Künzi believes that having its own currency and stock exchange are selling points for Switzerland, as both are important for its credibility as a financial centre. “All the major financial centres have their own stock exchange,” he says. “With so many Swiss blue-chip companies, we have a legitimate reason to run our own stock market. We have to ensure that the liquidity that’s needed to trade these stocks stays in Switzerland.”
De Picciotto approves of the Swiss government’s steps to keep the stock exchange in Switzerland. “But I think that the Federal Council unfortunately started to negotiate too late.” In de Picciotto’s view, Switzerland should have responded more forcefully by January to the EU’s December 2017 decision to grant Switzerland’s stock exchange equivalent status for one year only.
“As long as Switzerland remains a leader in private banking, we have to deal with the fact that we will regularly be under attack,” says Künzi. “If you had said to me in 2007,” de Picciotto continues, “that we would lose banking secrecy, that we would suffer a financial crisis with massive bankruptcies, that the US and the EU would blame us for untaxed assets and that we would have to deal with negative interest rates, I would have answered: we can’t survive that.” In light of that, Swiss banks came out relatively unscathed.
A private bank like UBP makes its living from giving its clients good advice. Where should one invest today given the turmoil on the financial markets? “We are still recommending US tech stocks,” de Picciotto tells us. “Asia is still doing well, but I’d be more cautious on the eurozone.” How much does a client pay for the management of an account? (You need to have at least CHF 1 million to start with.) “That varies greatly,” Künzi says, “It can be between 0.8% and 1.2% of the assets under management. The price depends on the size of the portfolio and the strategy. For very big clients – those who make all the decisions themselves – the costs can be lower.”
Which direction will UBP take in the coming years? De Picciotto predicts that, in a couple of years, it will manage around CHF 150 billion in assets with more than 1,700 members of staff around the world. He also stresses that the bank will be kept in the family, “My elder brother is Chairman of the Board of Directors, my sister has a seat on the Board, and just two months ago, my nephew started working with us in Geneva, heralding the arrival of the third generation.”