GENEVA – Swiss private banks are looking for footholds in Latin America as the lower fees and higher interest rates offered by local wealth managers deter the regions superrich from traveling to Geneva and Zurich.
Better investment opportunities are making private banking a domestic game in Brazil with as little as 5 percent of wealth in offshore centers, said Joao Albino Winkelmann, a director at Banco Bradesco, Latin Americas second-biggest lender.
A lot of people used to keep their money in Geneva, but that doesnt happen anymore, said Winkelmann, who helps oversee $31 billion of client assets. Very few Brazilians are sending money abroad.
Thats changing a relationship started in the 19th century when Swiss banks guarded the fortunes of plantation owners and mining magnates. UBS AG, Credit Suisse and other Swiss banks are being forced to seek acquisitions as Latin Americas $3.5 trillion wealth management market is set to grow by more than half by 2016, according to Boston Consulting Group.
People are becoming richer and richer, said Gustavo Raitzin, head of Latin America for Julius Baer Group. An emerging consumer class wants to make liquid investments and they need private banks and wealth managers, especially in Brazil.
Brazils private banking industry increased assets under management 50 percent to $214 billion between 2009 and 2011, according to a survey by Anbima, the national banking association. Switzerlands biggest banks are looking to tap that growth.
UBS, Switzerlands biggest bank, is in talks with Brasil Plural SA Multiplo, a Sao Paulo-based bank and asset manager to buy BNP Paribass Brazil wealth-management unit for about $50 million, a person with direct knowledge of the matter said on Oct. 6. The companies declined to comment on the discussions.
Credit Suisse this year increased its majority stake in Hedging-Griffo, a money manager in the same city that oversees $20.5 billion for wealthy individuals. The Zurich-based bank has identified Brazil and Mexico for domestic investment.
Both UBS and Credit Suisse, which each have at least eight offices in Latin America, declined to comment for this story on their strategies in the region.
Julius Baer last year purchased a 30 percent stake in GPS Investimentos Financeiros e Participacoes, a Sao Paulo-based money manager for wealthy families thats trying to double its client assets over the next five years. The bank is also buying businesses in Uruguay, Chile and Panama through the acquisition of Merrill Lynchs wealth management assets outside the United States from Bank of America Corp.
Brazilians only send money abroad in times of turmoil, said Winkelmann. Ten years ago money was being wired abroad like hell. Now absolutely theyre bringing it back. I dont see anyone making much money on an offshore business with low interest rates and the regulatory framework.
Economic growth has created a new class of entrepreneurs in Latin Americas consumer industries, said Henrique Meirelles de Campos, a former head of the nations central bank and now an adviser to Bedrock Group, a Geneva- and London-based private investment office.
Until 2003, Brazil was still in a period of recurrent financial crisis, short-term planning, short-term horizons, putting little investment into innovation, he said.
The financial system is now in good shape and the domestic market is growing.
About a third of the $1.5 trillion banked offshore by Latin Americans sits in accounts managed in Switzerland, according to a UBS presentation.