Banking On The Rich Could Be A Risky Proposition

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If you are super rich but need some extra cash to buy that special plane or yacht, then Swiss bank Credit Suisse is the place to go.

The bank is changing tack away from financing business to offering loans to the wealthy for those luxury purchases.

The bank’s accounts reveal a massive jump in lending to the ultra-rich.

The three main targets are loans for shipping, aviation or real estate.

These are the trappings of wealth of those with money to throw around on mere bagatelles that would add up to a life’s wages or more for most people.

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The strategy is part of years of planning by chief executive Tidjane Thiam who is gradually turning the bank like an oil tanker away from corporate banking to wealth management.

Bad time for shipping and aviation

As Switzerland’s second largest bank and an international reputation for discretion, Credit Suisse already had a head start on rivals for the wealthiest customers.

And the plan seems to be working as Credit Suisse is seeing private banking grow faster than that of Switzerland’s premier bank UBS.

The strategy does not come without risks. Shipping and aviation are having a bad time. Air Berlin and Monarch have gone in Europe, while many carriers and shippers are performing badly.

But Credit Suisse is backing away from funding the business and concentrating on the men and women in charge. Even this is a gamble, because their wealth often rides on the fortunes of their companies.

Although the bank is hush-hush about exposure to shipping and aviation, analysts suspect around £9 billion has been sunk into the market. This compares with £84 billion in private banking loans.

Foot in the door deals

The tactic is for Credit Suisse to take a risk with a smallish corporate deal to gain a foothold with the family running the business.

Rather than look at the transactions, Credit Suisse is building relationships with super rich families.

Credit Suisse’s assets under management swelled to a record £570 billion in the first three quarters of 2017 – a 7% increase.

Meanwhile, UBS lagged at 5% growth. UBS wealth management head Juerg Zeltner has declined a war to take on UHNWI business.

“We know the risks we are prepared to take and that limits my exposure to how much lending I am going to do,” he said.

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