Supermarket moves into wealth management
The banking arm of Switzerland's biggest retailer, Migros, has followed cantonal banks in making efforts to attract wealthier customers.
Migros Bank on Thursday launched a premium banking service for clients with assets of SFr250,000 ($195,000).
The high-street bank is the latest in Switzerland to make inroads into the more remunerative wealth-management sector.
In the public mind there exist three main banking groups in Switzerland: private banks catering to the wealthy; large banks such as UBS and Credit Suisse which are open to everyone, and other institutions – including Migros Bank and the cantonal banks – aimed at the middle class.
Those perceptions are now changing. With its new service, Migros is aiming at a wealthier clientele, with assets of a quarter of a million francs or a mortgage of SFr500,000.
"Premium Banking" marks a minor revolution in the banking world. Migros Bank, founded in 1958, has established itself as a mortgage lender. In June 2005 the bank's mortgage business was worth SFr19.8 billion.
The bank's 710,000 customers, many of them from low-income households, particularly appreciate its low charges. In eyeing a wealthier clientele, Migros could risk jeopardising its image as the people's banker.
But Migros is simply following competitors such as Raiffeisen, Switzerland's number three bank with 2.5 million clients.
The simple fact is that "wealthy" customers – those with assets exceeding SFr100,000 – bring in more money than those of more modest means. The current healthy state of the Swiss stock exchange allows the banks to do good business.
Raiffeisen has set the bar for premium banking even lower than Migros. "Customers with assets of SFr50,000 can receive a more individualised banking service," said Philippe Thévoz, public relations officer at the Raiffeisen bank in Lausanne.
The cantonal bank of Geneva is another bank active in wealth management. Its "Best of" service is open to clients with at least SFr100,000 "to offer a quality service to those with modest wealth", according to the bank's Blaise Goetschin.
But will these newcomers succeed in poaching customers from the specialist wealth management banks of Geneva or Zurich?
"The question is whether Migros can really offer 'private banking'," said Tibor Luka of BlueCap, a specialist wealth manager.
He says it is not just a case of offering a warm, personal welcome to wealthy clients. They also expect good financial products.
"Migros Bank offers around a dozen placement funds but they are not considered to be among the best performers," confirms Roland Bron, the director of VermögensZentrum, a specialist placement agency.
For its part, Migros Bank was unwilling to talk about the advantages of its premium service ahead of the new product's launch on Thursday.
swissinfo, Ian Hamel
Migros Bank reported a profit of SFr87.3 million ($67.8 million) in 2005, up 5% on 2004.
The volume of mortgage loans was up 3% and crossed the SFr20-billion mark for the first time.
Customer savings and investments were 4% higher at SFr26.9 billion.
Swiss bank UBS is the world leader in private banking with $1,295 billion under management.
Switzerland's second biggest bank, Credit Suisse, has $529 billion under management.
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