European private banks suffered their first annual profit fall in eight years, according to a report from consultancy firm McKinsey.
The study, which was cited in the Financial Times, showed the €11.5 trillion (£10.5 trillion) industry was hit by a 10% fall in profit last year, the first decline since 2009.
It also revealed 40% of private bank branches posted net withdrawals in 2016, with one in every 10 losing money.
Industry revenues — measured as a share of assets — dropped to 77 basis points in 2016, a fall of 20% from the pre-crisis high of 96bp registered in 2007.
According to McKinsey, low interest rates and trading activity, coupled with the shift into passive products resulted in profit margins slipping from 26bp in 2015 to 23bp.
The report also suggested tougher regulation to stop private banks helping the wealthy evade tax has hit earnings. This has forced banks to invest heavily in technology, forcing up costs.
UBS Wealth Management chief operating officer Dirk Klee told the Financial Times: 'The cost pressures on banks are enormous and they are not going away any time soon.'
Sébastien Lacroix, leader of McKinsey’s European private banking practice, said the performance represented 'a loud wake-up call' for the industry.
He warned banks they should prepare 'for several difficult years' as they overhaul their services, redesign product focus on the type of client they want to service as their historic 'one service model fits all' becomes obsolete.
'Private banks wanting to stay in the game in western Europe must radically upgrade their business models,' Lacroix said.