Expected strong quarterly earnings at Credit Suisse and a return to profit at Morgan Stanley will set the pace for the global wealth management sector as consolidation among private banks heats up.

The increased appeal of equities among wealthy clients has lifted the value of portfolios and will boost quarterly figures for private banks, even though some are still hoarding cash.

U.S. bank Morgan Stanley, which derives half of its revenue from wealth management after taking on most of the wealth assets of Citigroup Inc , will report on Wednesday.

Credit Suisse Group AG will follow suit on Thursday and is seen improving its bottom line to 1.6 billion Swiss francs ($1.6 billion) after winning market share in various key investment banking segments and attracting new client money.

Meanwhile, the battle to snap up high-value assets and staff in emerging markets continues, as shown by the $1.5 billion sale of ING Group NV's Asian private bank last week.

The focus for wealth managers now is about growing onshore and especially in Asia, said Vontobel analyst Teresa Nielsen.

We have seen Credit Suisse improving their market shares in Asia in the first half of 2009. It is going to be like this also in the third quarter as they are hiring in Asia, Nielsen said.

MARKET SHARE

UBS AG and Citi were the two largest private banks in Asia by end 2008. But their need to restructure after the subprime crisis may allow the next biggest HSBC Holdings Plc <0005.HK> and Credit Suisse to gain market share in the region.

Credit Suisse, which has overtaken UBS as Switzerland's top bank by market value, is seen attracting 9 billion francs of wealthy clients' net new money in the quarter and should halve outflows at its asset management division.

Charges on own credit of about 300 million francs would be nearly offset by 200 million francs gains still to come from a funds unit sale to Aberdeen Asset Management Plc .

We expect another set of pretty strong results, said Dirk Becker at Kepler Equities. The big driver should be the investment bank because the market had been good and we have seen good results from JP Morgan .

In the United States, Goldman Sachs Group Inc was able to quadruple profits, while Citi and Bank of America Corp suffered losses.

UBS is due to report on November 3. A year after it was rescued by the state, it is on a stronger footing after it shed some business lines and settled a bitter U.S. tax row.

ZKB and Postfinance said firms and institutional clients, which had rushed to the Swiss mid-sized players in the crisis, were returning to UBS, the Sonntagszeitung reported on Sunday.

But UBS is still expected to post a third-quarter loss.

Compared with last year (it) is in a much better situation. But it is not yet out of the woods, said Daniel Zuberbuehler, deputy chairman of Swiss financial regulator FINMA.

ACQUISITION MODE

Credit Suisse is one of the world's best capitalized banks and has often said it could make purchases in wealth and asset management. But no deal has yet materialized.

Meanwhile, German competitor Deutsche Bank AG is taking a stake in domestic wealth manager Sal Oppenheim that may lead to a full acquisition, helping it to sharpen focus at its wealth management division.

We see (the) asset management and private banking division as the jewel embedded within Sal Oppenheim, Keefe, Bruyette and Woods said in a research note, adding the wealth division, which it prefers to Sal Oppenheim's investment bank, could add 270 million euros ($403 million) annual pre-tax profit to Deutsche.

In Britain, HSBC, Barclays Plc and Royal Bank of Scotland Plc are unlikely to provide much detail on wealth management when they publish interim management statements in November.

But HSBC, which had courted the Asian private banking assets of ING, and Barclays may comment on their ambition to grow in the segment.

Katrina Hart, a wealth management analyst at Cannacord Adams, expects private banks' earnings to benefit from a combination of strong portfolio performance and a switch from bonds to stocks.

But even though wealth managers are likely to have performed better in the third quarter than earlier in the year, cash holdings are still averaging 8 percent of clients' portfolios and will put a lid on earnings' potential.

In a very low interest rate environment and when LIBOR is pretty much the same as the base rate, there is very little opportunity to make revenue on cash, Hart added.

(Additional reporting by Jane Baird in London; Editing by David Holmes)

($1=1.014 Swiss Franc)

($1=.6702 Euro)

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