Commerzbank threatens Swiss banks with rapid growth

The rapid expansion of Commerzbank may cause Swiss banks to struggle to sustainably generate profits as the German bank increases its abilities in wealth management operations. Commerzbank has opened 43 new wealth-management offices in the past six months and has hired a further 300 advisors in Germany after increasing revenue in Switzerland by a double-digit percentage. Analysts believe that UBS, Credit Suisse, Julius Baer and Vontobel may begin to face difficulty throughout the country as Commerzbank continues its growth.

The German market is getting tougher for Switzerland's private-banking institutes: Commerzbank is expanding its business at breathtaking speed.

Wealth management in a market with the sheer number of millionaires that Germany boasts is extremely attractive – and for Swiss banking even more so because of the geographical proximity and the lack of a language and cultural barrier. But such a markets tends to be hotly fought over, not least in the segment with affluent customers, who typically hold about one million euros.

Swiss banks with branches in Germany, for instance UBS, Credit Suisse, Julius Baer or Vontobel are known to have struggled to sustainably generate profits.

Still, Vontobel Germany last year finally became profitable after years of losses. And UBS would also have posted a profit at its German unti had it not been for reserves it had to put aside to cover for potential claims in the Madoff fraud case.

Massive Expansion at Commerzbank

These rays of hope may soon fade given the speed of expansion at Germany's No. 2 bank: Commerzbank, which in part is owned by the state, has boosted the number of branches catering to rich clients as well as the number of private bankers it employs within the past 12 months.

Commerzbank currently operates 105 wealth-management offices, compared with 62 at the beginning of the year. The number of advisers has gone up to 1,000 from a previous 700. These figures today were reported by «Private Banking Magazin».

The German institute also does business in Switzerland, where it has been operative since 2011. It has six branches with a total of about 130 employees. The focus in Switzerland is on business customers. Last year, it acquired 600 new corporate clients and increased revenue by a double-digit percentage figure.