Wealth management arms of European and US banks are in most cases continuing to prove a boon rather than a burden to their parents that have otherwise suffered heavy losses, figures in the quarterly reporting season show so far.

However, the pattern is far from uniform and in some cases, private wealth divisions of banks such as Credit Suisse have seen their profitability squeezed as the competition to run money for high net worth and ultra-high net worth clients has intensified.

Although not all banks have yet to report their second quarter figures – such as UBS and Deutsche Bank – most have done so.

Swiss private bank Julius Baer, which styles itself as a pure-play private bank, this week said its first-half net profit fell by only 2 per cent to SFr510 million ($502 million) from the same period last year, a figure that beat analysts’ forecasts.

Analysts at Morgan Stanley, for example, say they prefer to hold Julius Baer instead of UBS. The latter bank has so far chalked up eye-watering total debt write-downs of $38 billion since the credit crisis erupted last year. With its more concentrated focus on wealth management, Julius Baer’s pure-play status has proven fortuitous, at least in the short-run, Morgan Stanley says.

Morgan Stanley analysts said Julius Baer and other private banks of similar size had a once-in-a-lifetime opportunity to grab business from UBS.

UBS, Julius Baer, Credit Suisse, Deutsche Bank, BNP Paribas and Lloyds TSB all have Tier 1 capital ratios – a test of financial strength as defined under

Basel international banking rules – of at least 8 per cent or more, according to Morgan Stanley figures. As the financial strength of a bank is clearly an important reassurance for its wealth management clients, this is worth noting. A number of banks have acted in recent months to strengthen their capital reserves with rights issues and other measures. So far in 2008, European banks and related financial institutions have raised a total of $96.6 billion in new capital.

With a few exceptions, wealth management earnings continue to grow or have fallen only slightly from what was a strong period a year ago. One such exception is at Credit Suisse, which reported its Q2 figures yesterday. The wealth management division of

Switzerland’s second-largest bank saw its pre-tax profit drop quite sharply to SFr830 million, a fall of 17 per cent on the same period a year before. The parent bank’s profits also dropped, but less than analysts had feared.

In the

US, meanwhile, sharp losses at the parent bank level contrasted with the wealth management arm. Wachovia made a Q2 loss of $8.9 billion, or net loss of $4.20 a share, including a $6.1 billion write-down connected to market losses.

But the North Carolina-based bank did see improved revenues and net income from its wealth management unit. Net income at its wealth management arm rose by 9 per cent compared to the same quarter of 2007 to $498 million on 6 per cent revenue growth. Net interest income rose by 11 per cent on loan growth of 10 per cent.

JPMorgan also saw net income fall at its overall group level but wealth management income rising. JPMorgan said private bank revenue rose by 18 per cent in Q2 from a year before to $765 million as a result of higher deposit and loan balances, higher placement fees and higher assets under management. Some of the gain was offset by lower performance fees, however.

At Bank of America, global wealth and investment management net revenue increased by 21 per cent in the second quarter. US Trust, Bank of

America Private Wealth Management net income rose 25 per cent to $152 million. Net revenue rose 43 per cent to $706 million.

Again, at Wells Fargo, the bank group saw profits drop but its wealth management operation bucked the trend. The bank said its wealth management division enjoyed a rise in revenues and net income. Revenue rose 13 per cent in Q2 from a year before. Net income rose 29 per cent from a year before.

At Citi, the Wall Street-listed giant said it made a net loss in the second quarter of $2.5 billion, equating to $0.54 per share, contrasting with a profit of $6.2 billion in the same quarter a year before. On a continuing operations measure, the net loss was $2.2 billion. On the wealth management side, net income fell slightly.

At Morgan Stanley, its wealth management segment was also a positive contributor to the US bank's bottom line. Morgan’s Global Wealth Management achieved net revenues of $2.4 billion and generated net new assets of $13.3 billion, the second highest ever, and the bank’s ninth consecutive quarter of client inflows.

There are signs, certainly, that some of the strongest gains by wealth management profits at banking groups may have passed, or at least have slowed for the time being. But on the evidence to date, the wealth arms of banks are still more than pulling their weight.