Protecting wealth in times of war

Inflation and economic misery: Lombard Odier in the "Thirty Years War" from 1914 to 1945.


The years from 1914 to 1945 are challenging times for our bank. What starts with the outbreak of the First World War only ends with the defeat of Germany and Japan in 1945. The world wars and the Great Depression close the chapter of fast global integration and economic growth during the 19th century. They also result in massive losses for investors.

When the First World War ends, the Austrian, Russian and Ottoman Empires collapse, never repaying their debt. A few years later, Germany descends into hyperinflation, making any security held in Reichsmark worthless. Even the currency of victorious France depreciates by more than 80%. Only investments in Pound Sterling, US Dollars and Swiss Francs maintain their value.

The Great Depression in the 1930 has an equally disastrous impact. From 1929 to 1932, the American Dow Jones Index drops by 85%. English shares are not far behind. Trade barriers are erected between all major countries and the tensions in the Far East explode into open conflict between Japan and China in 1937. The opening shot of the Second World War is fired soon thereafter.
The war from 1939 – 1945 is probably the most total war ever fought in history. The participating nations mobilise all national resources. Entire economies are dedicated to the war effort. Whilst America’s industry is sheltered by the sheer distance from the war theatres, the economies of the Axis Powers Germany, Italy and Japan are obliterated by air campaigns. Billions of investments are destroyed.

The First World War affects our bank from the very first day. Our lead partners and many male employees are mobilised for border protection. The bank is run by retired partners and female staff. Given the complete closure of the Swiss borders, business is slow. All governments establish restrictive rules for securities transactions, managing a portfolio of foreign securities is challenging and contacting foreign clients almost impossible. The bank is hardly profitable.
The years between the wars are not of much relief. Whilst many Genevan families are able to preserve their wealth due to their American investments, the economic environment remains harsh. With the boom in the USA from 1925 to 1928, optimism returns for a few years. But the crash of 1929 extinguishes this glimmer of hope.

Despite the adversity, our partners believe in a prosperous future. They merge with smaller banks to increase the number of clients and in 1923 build  a new head office at Corraterie No 11 where it still stands today. Ten years later, when the bank faces financial difficulties, the partners convert it into an unlimited partnership. During the same years, in 1926, Lombard Odier is one of the first banks in Switzerland to offer a pension plan to its employees. As an unwritten policy during the Great Depression, nobody is made redundant.

The years of the Second World War resemble the experience from 1914to 1918. With financial business in Europe blocked by Nazi Germany and Swiss assets in America frozen, there is little to do. The bank barely breaks even. As in the First World War, retirees and women keep the bank open.

During these challenging thirty years, our partners develop a new business model – they advise clients in the management of their private portfolio and manage portfolios of clients they cannot  get in touch with. When everybody wonders how to stem the horrendous investment losses, the partners make their knowhow available for our clients. Was it necessity or an innovation? Probably both – but definitely the origins of the private banking business at Lombard Odier, the most important business line today.

Alexandre Lombard Read more
Alexandre Lombard

A prudent approach to investing has been part of our DNA from the start:
"The London market has been rocked by massive bankruptcies. […] We now appreciate the benefits of a measured approach. I only wish that I had been even more prudent on everyone’s behalf."
Alexandre Lombard, Diary, 20th September 1847