Private banks leave Geneva as it loses its shine

The locked entrance of Lloyds Banking Group's former offices is a reminder that some of the biggest names in global finance have quit Geneva.
The locked entrance of Lloyds Banking Group's former offices is a reminder that some of the biggest names in global finance have quit Geneva.PHOTO: BLOOMBERG

GENEVA • Three years after Lloyds Banking Group sold its private bank, the only signs of life at the now-empty building are piles of cigarette butts and nutshells lying on its dirty window ledges.

The locked entrance, where millionaire clients used to come and go, is a reminder that some of the biggest names in global finance have quit Geneva for good.

"The disappearance of international private banks has left an eerie silence in some of the downtown offices that were once the top end of the market," said Mr Raphael Reginato, a broker at real estate asset manager AMI International.

North American and European banks are quitting Geneva as companies battle with the loss of financial secrecy, the strong Swiss franc and pressure on profitability from low interest rates and tougher regulatory demands.

Tax probes by the United States and France and a new system of bank-data exchange between governments have scuppered the traditional "no questions asked" approach to serving rich clients who reside in other countries.

"Everybody is expecting the number of banks in Geneva to contract even further," said Mr Stephane Muller, a partner at Ernst & Young. "Fortunately, some of the local family-owned firms still have the appetite to buy them."

The canton of Geneva derives about 17 per cent of its gross domestic product from financial services companies, according to the local industry group. That contribution is at risk after the number of banks declined to 119 last year from 140 in 2008, and the industry's workforce shrank about 9 per cent in the past three years.

The cuts are affecting everything from real estate to hotels. "People no longer need to come to Geneva to check their bank accounts," said Mr Thierry Lavalley, general manager of Grand Hotel Kempinksi. "There are fewer business trips."

About 31,000 sq m of prime commercial real estate near the city centre is unoccupied, roughly the same as four soccer fields. Since 2011, the canton of Geneva's office vacancy rate has more than tripled to almost 8 per cent, the highest in 10 years, according to AMI.

Lloyds vacated its Geneva building after selling its international private banking business to Union Bancaire Privee. So have others.

Bank of America sold its Merrill Lynch international wealth businesses to Julius Baer Group, while Royal Bank of Canada divested its Geneva business to local firm Banque Syz. Morgan Stanley sold its Swiss wealth business to the private bank and asset management firm owned by billionaire Joseph Safra. Goldman Sachs Group plans to close a Geneva branch with 18 employees to streamline its operations, source said.

"Many of the banks are really stuck with the compliance and regulatory issues and they can't focus on developing new business," said Mr Christian Hintermann, a partner at accounting and advisory firm KPMG.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on June 17, 2016, with the headline 'Private banks leave Geneva as it loses its shine'. Print Edition | Subscribe