There are €600bn in assets under management in retail and private banking in Luxembourg Photo: EU

There are €600bn in assets under management in retail and private banking in Luxembourg Photo: EU

Despite the covid-19 pandemic, assets under management in Luxembourg grew by 9% in both retail and private banking amid a rise in high-net-worth individuals, a survey published by bankers’ association ABBL on Tuesday said.

Assets under management increased by 9.3% in retail banking and 9% in private banking, reaching €92.4bn and €508bn respectively. Private banking has recorded 12 years of uninterrupted growth since 2008, with assets up 130%.

In retail banking, the property lending business fuelled the trend, with a 9% increase observed for individual customers and an 8% increase for businesses. In private banking, three elements are at play: a post-Brexit effect with the arrival of new banks on the market, the performance of the stock markets and the net inflow of new clients.

Clients with more than €20m represent almost 60% of assets under management in private banking, compared to 52% in 2017. At the same time, clients with less than €1m fell to 7% of the total last year, compared with 12% three years earlier.

More money held in current accounts

However, only 21% of assets in this segment come from Luxembourg, as 17% come from neighbouring countries and 47% from the rest of Europe. As recently as 15 years ago, half of the assets of private banking clients came from the three neighbouring countries.

In retail banking, residents account for 88% of assets.

These assets are mainly kept in savings accounts (44%) over current accounts (38%). There was a noticeable drop in spending during the pandemic as assets held in current accounts by individual clients jumped by 26%, twice as much as for professionals.

Another effect of the health crisis is that the number of cash withdrawals from ATMs has fallen by 25%, and even by 51% at bank counters. Electronic transfers, on the other hand, increased by 6% in one year, the study shows.

The banking sector represents around 30% of Luxembourg’s GDP and contributes significantly to public finances.

ABBL

Professional account holders switched to digital banking: 32% more of them used e-banking last year, with 132,000 clients, compared to 106,000 for individuals, an increase of 6%.

On the employment front, the trend is towards stabilisation, or even a slight decline, with 7,339 employees in retail banking (-1.6%) and 6,097 employees in private banking (-0.6%).

“The banking sector represents around 30% of Luxembourg’s GDP and contributes significantly to public finances,” writes the ABBL, adding that the country maintains its position as an international private banking platform. However, the trade association admits that for this particular segment, profitability remains problematic, “especially for small structures.”

This story was first published in French on . It has been translated and edited for Delano.