A large number of wealth management
businesses have been put up for sale in the past month as private
banks look to shed non-core operations due to tough trading
conditions.
Standard Chartered’s Latin American
operations, Investec’s Swiss business and Bank of America Merrill
Lynch’s South Korean unit are just some of the wealth management
arms being sold around the globe.
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New research has confirmed the
global wealth management industry is grappling with slowing sales
alongside rising costs. Consultancy Scorpio Partnership’s annual
survey found the rate of new money coming into institutions slowed
to about 19% last year.
Cost-income ratios across the
industry stood at nearly 80% in 2010, compared with a pre-crisis
level of 70%, according to Scorpio, whose survey covered 200
institutions.
Standard Chartered’s Latin American
wealth operations centre on offshore Latin business flowing into
Miami, as well as offshoots in Uruguay and Chile. The operation was
acquired by Standard Chartered when it bought American Express Bank
for about $860m in 2008.
The deal, according to Standard
Chartered executives at the time, was aimed at helping to ‘turbo
charge’ their recently-launched private bank business.
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By GlobalDataMiami was one of Amex’s largest
private bank businesses but it was built around Latin clients
booking into Miami, among the type of operations regarded as
increasingly vulnerable to growing regulatory pressures to curb tax
evasion and criminal activities.
“That offshore business has been
under regulatory pressure for sometime, so Standard Chartered has
found it difficult to grow at the same pace as the Asian
businesses,” said one banker familiar with the business.
“Latin America is a geography
Standard Chartered has struggled in.”
Standard Chartered said it was
talking with some interested parties but nothing was final. The
bank declined to mention a price and said there was not a specific
timeline for the sale.
Swiss banks feel the
pinch
For Swiss private banking, these
issues are inflamed by the continuing strength of the Swiss franc.
A number of foreign players now want to exit Switzerland,
particularly as the traditional offshore business is decline.
ABN Amro Bank wants to sell its
private banking operations in Switzerland, Swiss daily
Handelszeitung reported.
Vontobel is among the potential
business for the Dutch bank’s private banking operations in
Switzerland, which had more than CHF14bn ($17bn) assets under
management (AuM) at the end of 2010 and could fetch between CHF100m
and CHF150m.
Investec, the Anglo-South African
group, has also signalled it may sell its private banking unit in
Switzerland. The bank has hired Fenchurch Advisory Partners to
advise it on the sale of Investec Bank (Switzerland), which has
CHF2.8bn AuM in Geneva.
Belgian-based financial group, RHJ
International, owner of Britain’s Kleinwort Benson, has emerged as
a bidder for the BHF Bank arm of Deutsche Bank. Deutsche has
struggled to find a buyer for BHF, which it bought through its €1bn
($1.4bn) purchase of Sal Oppenheim completed in March 2010.
A sale of BHF to Liechtenstein’s
LGT Bank collapsed earlier this year, after apparent German
regulatory opposition.
A shortlist of about 10 bidders has
been drawn up for Anglo Irish Bank’s (AIB) €500m wealth management
business. The sale, part of the break up of AIB under
reconstruction of much of the Irish banking system, is expected to
be completed in the third quarter of the year.
Another private banking arm is
being reoffered after the first proposed deal collapsed. Up to 10
offers have been submitted for the KBL arm of Belgium’s KBC Group.
An attempt to sell the business for
€1.35bn to India’s Hinduja Group failed in March, amid indications
that regulatory barriers were put in the way of the transactions
from Luxembourg.
Potential bidders are said to
include Société Générale, Julius Baer, Royal Bank of Canada and
private equity groups.
In Asia, Woori Investment & Securities has agreed to buy the
South Korean wealth management operations of Bank of
America/Merrill Lynch. Details were not disclosed. Merrill Lynch’s
Seoul private banking operations are believed to employ around 10
bankers, and oversee around KRW1trn ($1bn) in client assets.
