Wednesday, 16 July 2014
(Reuters) - UBS (UBSN.VX) expects its business with its wealthiest clients to grow by 7 to 8 percent in terms of assets, as the area plays an increasingly important role for the Swiss private bank.
Private banks are increasingly seeking the ultra-rich - typically those with liquid assets of 50 million Swiss francs ($55.9 million) or more - in a shift from an earlier strategy of chasing the "mass-affluent", or moderately rich.
"Growth in net new money of 7 to 8 percent is possible over the cycle, if you look at the past five or six years," Joe Stadler, the Zurich-based bank's global head of ultra-high net worth business, told Reuters in an interview. He did not specify a time frame.
UBS has only published separate results for its ultra-rich division for the past two years. In that period, it has posted quarterly growth of net new money of between 4.5 percent and nearly 12 percent. It recorded growth of just over 7 percent in the latest quarter.
Switzerland's largest lender, and the world's largest private bank by assets, has cut back on risky debt trading, which has been made more expensive by tougher regulations, in favor of its low-risk private banking arm, a move it says will drive returns for shareholders.
UBS' business with the ultra-rich now accounts for almost half of the broader private bank's assets of 899 billion francs. That proportion is up from about a third five years ago.
While business with the wealthiest actually commands a lower margin on assets than other segments, these clients make up for it in sheer volume. Because their assets tend to be diversified between business and private interests, the super-rich also tend to feed into private banks' other arms - investment banking and asset management.
The ultra-rich are known as a high-maintenance group of clients, typically commanding more sophisticated banking services as well as the best perks from their private banks like private dinners with professional tennis player Roger Federer, a Credit Suisse (CSGN.VX) brand ambassador.
For UBS, which does not break down the ultra-rich segment by region in its results, Asia represents a major growth market, as the region sees a surge in millionaires and billionaires.
"We've been strong in Asia for many years and want to build our presence further. We're also growing in emerging markets, in Europe, and in Switzerland," Stadler said.
Europe is a sore spot for Swiss private banks, which are suffering withdrawals of funds as Germany, France and other European countries crack down on untaxed funds hidden in Switzerland's offshore accounts.
However, the ultra-wealthy are more likely to be tax-compliant, according to Swiss private bankers.
"The debate around tax transparency is hardly relevant for ultra-high net worth clients," Stadler said.
"Today's standards help to prevent banking secrecy being abused for tax evasion, and this development has been favorable for our business."
Switzerland, along with Singapore, has joined the growing ranks of countries agreeing to share tax information, effectively abandoning centuries-old banking secrecy under an onslaught of international pressure.
Swiss banks UBS and Credit Suisse are increasingly seeing competition for the ultra-rich segment, for example from Deutsche Bank (DBKGn.DE) which said last week it was growing quickly with new client money pouring in, following two years of restructuring.
($1 = 0.8921 Swiss Francs)
(Reporting By Albert Schmieder; Writing by Katharina Bart; Editing by Pravin Char)
Wednesday, 2 July 2014
How FATCA works
Washington’s new legislation, the Foreign Account Tax Compliance Act (FATCA), aims to fight tax evasion by wealthy Americans (the “fatcats” lambasted by President Barack Obama) by ensuring that tax is paid on all capital held abroad – in banks, insurance companies and other entities.
According to the legislation, foreign financial institutions have to register with the American tax authorities (IRS) and send in periodic reports on the assets that they hold for American taxpayers. The information should start to flow by April 30, 2015.
In an initial phase, only deposits over a certain limit, such as $50,000 for personal accounts, will be reported. Later all capital will have to be declared.
So far about 80 countries are negotiating or have concluded agreements with Washington to implement the FATCA system.
The American legislation is the model for the standards developed by the OECD to introduce automatic exchange of information on a global level.
US citizens abroad given lifeline
The Internal Revenue Service has given US citizens living abroad further breathing space to get their tax affairs in order.
On June 18 the IRS lifted restrictions to its offshore voluntary compliance programme by allowing citizens to apply if they have less than $1,500 of unpaid tax to declare.
Penalties will also be waived for those who can show that they did not wilfully hide assets.
This might apply to thousands of dual citizens living outside of the US who did not know that they should have been filing US tax returns.