Switzerland's BSI Exploring Paths to Fee Income in U.S.
Banca della Svizzera Italiana is looking to increase its asset management business in the United States as a source of steady fee income.
The U.S. private banking arm of Switzerland's sixth-largest commercial bank is an aggressive lender to entrepreneurs building fortunes in industry, real estate, aircraft, and oil. It also manages some large portfolios in the United States. But BSI wants to leverage its primary strength overseas - global portfolio management - in the United States.
Diversification a Goal
Bank officers are "exploring ways to develop fee-income business," said Louise Gunderson, senior vice president and head of private banking operations in the United States. The bank wants "to diversify a little bit into other areas."
BSI, a $5 billion-asset bank based in Lugano, does not break out assets under management or loans extended by its private banking arm.
But its reputation, management team, and existing client base suggest the bank could build a sizable business of portfolio management in the United States.
Slack Loan Demand
More and more banks with private banking divisions are aiming to bolster their assets under management. The recession is a contributing factor, having dampened the demand for loans and driven up losses.
"Across the country, private bankers are looking for ways to shift their emphasis on asset generation to focus on asset management," three private banking experts wrote in a recent essay in The Journal of Commercial Bank Lending.
At Bank of America, where the private banking division is driven by lending to individuals, officers are "out there selling the bank's investment products," said Stephen V.R. Spaulding 3d, senior vice president and head of U.S. private banking.
Fee income is considered a prime way to help financial institutions stung by the credit crunch improve the bottom line. And fees derived from asset management can be particularly lucrative when dealing with affluent clients' portfolios.
"The advantage to fee income, of course, is that you're not using your balance sheet," Mr. Spaulding said.
A Link with Swiss Bank Corp.
One possible way for BSI to expand its asset management business would be to team up with Swiss Bank Corp., the majority shareholder in BSI and Switzerland's second-largest commercial bank.
Swiss Bank acquired the majority stake in BSI this spring through a share swap with Unigestion, a Swiss-based financial company.
Through its New York branch, the private banking unit primarily serves U.S. citizens, Europeans living in the United States, and Latin Americans.
$310 Million in U.S. Assets
BSI specializes in commercial lending, foreign exchange trading, and private banking. The sixth-largest bank in Switzerland, with more than $5 billion in assets, it added the U.S. private banking division to its New York branch at the end of 1988 in an attempt to broaden its base outside its home country. As of June 30, 1990, the U.S. operation had $310 million in assets.