American International Group (AIG) Private Bank plan jointly to
create a bank to cater to less wealthy segments – an alliance aimed
at targeting the mass affluent client base.
Sarasin, controlled by the
Netherlands’ Rabobank, will own 57.5 percent of the venture and AIG
the remainder. The two partners expect the merging of their
existing business in this segment to create a total of 235,000
clients and CHF8 billion ($6.6 billion) in assets, spread across
Switzerland, Germany and Austria. The venture also plans to expand
into new markets in Eastern Europe.
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By GlobalDataThe new bank, which is to be operational by the end of 2008, will
target clients with up to CHF500,000 to avoid cannibalising
higher-end business from AIG and Sarasin, which typically deal with
clients who have at least $1 million to invest. The venture expects
to generate earnings before interest, tax, depreciation and
amortisation of about CHF100 million in its first year, the two
said.
Household target
It will target the 15 percent of European households that account
for 60 percent of the region’s wealth, Sarasin CEO Joachim Straehle
said. The business of running a bank for affluent clients is “very
different to a private bank’’, he said.
The new business is designed to create value without losing cash
flow, Eduardo Leemann, chairman of AIG Private Bank, said, noting
that it will piggy-back off the trading and computer systems of its
parent banks to control costs.
Marco Weber, currently head of personal banking at Sarasin, will be
chief executive of the new bank, which has not yet been given a
name. The bank, which will have branches in Zurich, Geneva and
Basel, plans to open 4,000 new accounts each month and to double
assets under management in its first three years.
A number of banks have attempted to conquer Europe’s mass affluent
investor market sector in the past. However, the control of
distribution and the need to cultivate clients, including having
advisers visiting them in their homes, has invariably loaded these
attempts with very high costs.
