Geneva rides global economic wave

Banker Ivan Pictet said booming markets had made life easier for asset managers Keystone

The Geneva banking and finance industry says it expects to see profits rise by 15 per cent this year but warns that a cyclical economic peak may not be too far away.

Surging global stock markets – the Swiss Market Index has reached record highs – have helped boost the sector’s fortunes, as has the growing influence of the city as a global centre for commodities trading.

At its annual press conference on Monday, the Geneva Financial Center (GFC) painted a rosy picture for the city’s 22,752 bankers and wealth managers.

The number of staff employed by the city’s 138 banks has grown by ten per cent over the past 18 months and now stands at more than 18,000.

But Ivan Pictet, president of the GFC’s board and managing partner of Pictet private bank, cautioned that future growth was far from guaranteed.

“We can expect to see continued economic growth in Switzerland in 2007, although perhaps rather slower and we will undoubtedly be very close to a peak situation in the course of 2008,” he said. “This corresponds to the normal order of economic cycles.”

Rising fortunes

Pictet noted that three successive years of rising stock markets had aided the fortunes of asset managers in Switzerland.

According to Swiss National Bank figures, the volume of assets under management in Switzerland stood at SFr4.5 trillion ($3.5 trillion) in June this year – up just under 14 per cent on the previous year. Geneva manages a third of this sum.

Pictet said company revenue would need to keep rising and interest rates stay low in order for growth to continue. “One can legitimately have a few concerns about this,” he warned.

Factors to watch out for, said Pictet, were lower commodity prices, tighter monetary policy and the need for significant investment in human resources and logistics.

“If all these things happen at the same time, profit forecasts of 5-7 per cent for 2007 could… turn out to be optimistic,” said Pictet.

Private banking

Private banking remains the driving force of Geneva’s financial sector, accounting for 55-60 per cent of revenue. The unstable geopolitical situation in the Middle East and the recent conflict in Lebanon have led to an increase in clients from the region.

But the influence of the private banks has waned slightly as that of commodities trading has grown. The GFC claims the city is now the global leader in terms of oil trading, and is home to around 300 trading firms dealing in oil, non-ferrous metals and cereals. This sector employs around 7,000 people.

With employment conditions remaining strong, one of the biggest headaches for managers is recruiting sufficient qualified personnel. Larger banks are increasingly having to look abroad for talent.

In a thinly veiled attack on the cantonal government, Pictet queried why the canton had budgeted a deficit of SFr220 million for 2007 at a time of favourable economic conditions.

According to the GFC, the city’s financial sector generates more than a third of the canton’s fiscal revenue when times are plentiful.

Pictet said he had yet to see a signal from the cantonal government that it was ready to tackle the canton’s debt in a determined way.

swissinfo, Adam Beaumont in Geneva

Key facts

There are 2,592 finance companies in Geneva:
Banks – 138.
Financial institutions – 1,839.
Independent asset managers – 615

The sector employs 22,752:
Banks: 18,150.
Financial institutions – 2,374.
Independent asset managers – 2,228.

In brief

The Geneva Financial Centre was created in 1991 by the 80 bank members of the Geneva Stock Exchange.

The organisation’s main objective is to promote the development and the influence of Geneva as a financial centre.

It also works on developing and reinforcing the knowledge and competences of banking and financial personnel.