Wealth management woes of banks to continue
Australianbanks can expect further suffering from their underperforming wealth management divisions in the second half of the year, claims the latestKPMGMajor Bank Survey.
The survey shows all major banks reporting depressed earnings for their wealth management businesses for the first half of 2002/03, with two being forced into valuation write-downs.
KPMG’s financial services division head Peter Nash says the poor performance can be blamed on the underperforming equity market.
According to the report, total appraisal adjustments to wealth management businesses from March 2001/02 to March 2002/03 had resulted in a fall in earnings of $1.1 billion.
Excluding appraisal adjustments, the KPMG report says earnings for wealth management depreciated by $104 million, or 8.8 per cent, over that period.
“It’s just a matter of how long we are going to drag along the bottom of the cycle,” Nash says.
The figures represented a “sluggish at best” performance for wealth management in the first half, according to Nash, and did not measure up to the expectations the banks held when entering the sector.
The KPMG survey claims that a key area of focus for banks in the next half will be to achieve efficiency levels and reduce discretionary spending in their wealth management businesses.
The survey says the challenges will include stimulating demand for products in the face of continuing market weakness, successfully cross-selling product to existing customers, streamlining existing processes, and achieving synergies with existing banking processes.
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