Net New Money for Lombard Odier

Bernard Droux, one of eight partners with unlimited liability, says life is good right now for Lombard Odier & Cie., Geneva’s oldest bank. The bank is yet again set to meet its target for net new money.

Why? Because client inflows will at least match last year’s 7.2 billion Swiss francs. This will of course help to maintain profitability. The bank’s initial target for 2014 was between 7 billion and 8 billion francs. A complete success!

Lately Geneva is enjoying nice net cash flow from everywhere, at least in banks that are big enough to be known around the world. Switzerland is attracting money from all around the world, from the Middle East, Asia, South America and Spain.

As a result, Lombard Odier has nowadays 142 billion francs of assets under management. Their tactic is to attract new business as a crackdown on tax evasion and to convince American and European customers to retract their funds from offshore accounts. Ok, Swiss banks will lose some undeclared money. But on the other hand side they are getting money from rich foreigners that are concerned about the health of lenders in Greece and other indebted countries.

However there hasn’t been a higher influx of funds from Greece yet because wealthy Greeks already held their funds outside the country and preferred London, the Channel Islands and Cyprus to Switzerland until now. But more and more they see and admire the quality of Swiss banks.

Here is a prediction. Over the next two years, Switzerland Is expected to see an outflow of undeclared funds.

There will be a massive drop in assets under management of 25 % of the undeclared money. Why? Switzerland has signed agreements with Germany, the U.K. and Austria.

30% of private wealth held in Switzerland is probably undeclared and therefore at risk from foreign tax collectors because the Swiss secrecy advantage disappears slowly but steadily.

But investors can rest assured. That figure is probably way too high as Bernard Droux firmly opposes. According to him only a maximum 15 % of the client money at Lombard Odier and other private banks in Switzerland is undeclared money. You can estimate that new taxes only results in a tax withdraw of 5 % of client funds among Swiss private banks. This is still a pretty good number!

Why should investors still continue to let Swiss banks manage their assets?

“We need growth just to maintain profitability,” Droux says. A lot of clients now will have to be addressed in their home country to pay taxes and it is more expensive for them then to remain in Switzerland. Placing money in Switzerland is a win-win situation for both parties.

Zurich, 10 February 2015 Enzo Caputo, Swiss Banking Lawyers