The aggregate revenue of the banks in this report reached $114bn in 9m23 and $39bn in 3Q23, 10% ahead of the comparable prior-year periods. AuM – especially from $10m+ clients – and operating costs, however, grew faster than revenue, depressing pre-tax profit margins and productivity indicators.
Reflecting the increased investment from most in-scope banks, UHNWI/GFO segment of the market grew revenue slightly faster than other segments, while the revenue growth in EMEA and APAC outstripped AMER. The competition for top-level clients is heating up: Blackrock, for example, is improving its GFO offering.
Almost 80% of revenue growth in 9m23 (40% in 3Q23) was from net interest income, and this will likely taper off in the coming quarters. However, clients are (slowly) returning to the markets: following a slow 1H23, investment management and transactional fees grew 8-10% y/y in 3Q23. In APAC, reacting to the worsening geopolitical situation and an already-evident migration of HNWI+ clients, banks (especially those domiciled in the US) are shifting focus and senior management away from China and to South and Southeast Asia – most significantly, Australia, Singapore – and the Middle East. However, the outbreak of the hostilities in Israel and the potential for it spreading to other Gulf countries presents the banks – several of which made sizeable investments in the region in recent times – with a difficult balancing act.