After years of playing on the sidelines, U.S. banks are starting to make a mark on this city's storied private banking business.
A number of top U.S. banks-including Chase Manhattan Corp., Citicorp, Republic New York Corp., and Bank of New York Co.-have made Geneva a key part of their global private strategies.
They are going head-to-head with Swiss banks-long the standard-setters of private banking-to lure investment dollars from wealthy individuals around the world.
The Swiss and U.S. banks in the country are seeing a sharp rise in demand, especially from affluent people in emerging markets like Latin America and the Far East. These consumers are attracted to the economic stability of Switzerland and the country's long tradition of discretion in banking.
"The future looks pretty bright, especially with regard to emerging markets," says Georges Vergnion, chairman of Chase Manhattan Bank Switzerland.
Chase, which had $112 billion in worldwide private client assets under management and custody at the latest count, estimates that its business in Geneva is growing at around 20% a year.
At Bank of New York-Inter Maritime Bank, a Geneva-based bank in which Bank of New York acquired a 27.8% stake in 1989, executives estimate assets under management are growing at around 12% annually.
So far, many Swiss bankers profess to be unfazed by the efforts of their U.S. counterparts.
"All we see are off-the-shelf products," sniffs Hans Looser, a member of the management committee at Bank Julius Baer, a midsize Swiss bank that specializes in private banking and institutional asset management. "U.S. bankers are all bonus-driven, and they push the same products here as in the U.S. and in Asia."
Still, the rivalries are clearly heating up.
"Competition is becoming sharper, client loyalty is diminishing, and clients are becoming more demanding," Credit Suisse said in a recent survey.
And executives with U.S. banks say that building business in Switzerland has become a priority.
"Switzerland has an important role to play within the context of our global strategy," said Philippe Holderbeke, division executive for Europe, the Middle East, and Africa at Citicorp's private banking unit here.
The push in Switzerland underscores a worldwide boom in private banking.
According to data presented by Credit Suisse, liquid assets in the hands of wealthy individuals has increased from an estimated $9.2 trillion worldwide in 1985 to $16.7 trillion at the end of 1995.
Of that money, roughly 20% to 30%, or between $3.3 trillion and $5 trillion, is placed in so called "offshore" accounts, defined as accounts set up outside the investor's home country.
Of those offshore private banking assets, it is estimated that about 40%, or between $1.3 trillion and $2 trillion, is handled by banks in Switzerland, including big U.S. banks.
"There's a high level of professionalism in Switzerland that attracts people," says Matthew Stevenson, chief executive at Bank of New York-Inter Maritime Bank. "Private banking here is in a class apart and fits in with the luxury hotel, expensive car world."
Within Switzerland, Geneva, with 54 Swiss banks and 108 foreign banks, is very much the center of a private banking, followed by Zurich and Lugano.Private banking has been building steadily in Geneva ever since large numbers of Huguenot refugees fleeing from France settled in the city in the 17th and 18th centuries, bringing their commercial and banking expertise with them. Since then, wealthy people from around the world have been drawn to the city by steady improvements in transportation and telecommunications, high-quality hotel accommodations, and multilingual bankers.
For big U.S. banks, a strong Swiss operation is proving to be a natural fit with their pushes into emerging markets.
Citicorp, for instance, manages some $23 billion from clients in Europe, the Middle East, and Africa-and roughly two-thirds of that is managed in Switzerland, Mr. Holderbeke said.
U.S. bankers maintain that their global networks and their ability to manage an account from different locations around the world gives them an edge over Swiss banks. And they are also using their private banking businesses here to try to cross-sell clients on a host of other products, including lending, trade financing, advisory services, and other corporate- style banking in addition to private portfolio management.
"Swiss banks have a unimodal strategy," said Mr. Holderbeke. "Their main objective is to pull money into Switzerland, and they don't go beyond portfolio management."
Still, building a private banking presence in Switzerland is by no means easy.
"You can't just get into this business with a glorified upscale office and a bunch of private bankers with suitcases," Mr. Holderbeke observed. "If you want to get in, you have to get in for the long term."
Swiss banks, for their part, make no secret of their intent to beat back the mounting competition. Whereas many were once content to limit their advertising to discreet brass plaques, they now post illuminated posters at Geneva airport and take out full-page ads in major international newspapers. They are also spinning their private banking operations off into separate units and opening offices around the globe.
"There's really a beauty contest on these days," says Mr. Looser. "The old days when private bankers stayed happily locked up in their offices are over."
Many bankers says that a shakeout is becoming inevitable, especially among smaller banks.
Since 1987, the number of Geneva-based Swiss private banks, some of them dating back to the 18th century, has declined from 23 to 16. Of the remaining 16, five have joined forces in order to save on back-office and marketing costs. At the end of the day, bankers predict, only the bigger banks will survive, giving U.S. banks another extra edge.
"Smaller banks are fighting a losing battle," said Mr. Holderbeke.
