Wealth
management assets are being increasingly divested by
capital-starved banks as the backwash of the global financial
crisis triggers what is shaping up to be a long-awaited bout of
wealth industry consolidation.
Dutch
bancassurer ING plans to sell off much of its private banking
operations while Germany’s largest independent private bank, Sal
Oppenheim, is seeking help from Deutsche Bank. In addition,
Commerzbank has sold several private banking units as a condition
set by the EU in return for extensive state aid while Royal Bank of
Scotland has sold a number of private banking operations in Asia to
ANZ.
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Financial
market volatility, competition on fees and the move to the
sidelines by shell-shocked investors, who have often switched into
cash and government securities, are impacting on industry
profitability. Swiss private banking is also seen as coming under
pressure because of co-ordinated global action against tax
havens.
Largest
disposals since AEB in 2008
In
the biggest prospective sale, ING has decided to seek buyers for
its Swiss and Asian private banking operations in a divestment
being arranged by JP Morgan. ING’s private bank has about €55
billion ($77 billion) of private client assets under management,
which would make this the biggest disposal since Standard Chartered
paid $1.1 billion for American Express Bank in 2008.
ING, which
received substantial Dutch state aid last year, has never been a
large-scale private banking force and private bankers familiar with
its operations say it had been underperforming in the past year,
with an overall outflow of client assets. Assets under management
at its Asian private banking division declined to €11 billion as of
mid-year from €11.4 billion at the end of March, largely due to
adverse currency movements. But the operation in Asia is believed
to be subscale in several jurisdictions so it could prove difficult
to integrate.
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By GlobalDataJulius Baer,
the Swiss private banking which nowadays bills Asia as its “second
home” after Switzerland, is understood to have held preliminary
negotiations with ING.
Meanwhile,
Deutsche Bank is supporting a €300 million capital-raising by Sal
Oppenheim, an investment bank and wealth manager which has been
caught up in the sharp German economic downturn and seen some of
its investment holdings turn sour. The bank had €132 billion of
assets under management at the end of 2008. Deutsche is negotiating
a minority stake in Oppenheim, in a deal which should expand
Deutsche’s domestic wealth franchise. Frankfurt bankers say they
would not be surprised if Deutsche eventually took full control of
Oppenheim.
Commerzbank has
agreed to sell its Swiss private banking arm, Commerzbank (Schweiz)
AG to the Vontobel Group. The unit had about CHF4.5 billion ($4.2
billion) of assets under management at the end of last year.
Commerzbank also sold Dresdner Bank (Switzerland) to the LGT
banking group of Liechtenstein. LGT said that, after absorbing
Dresdner, its combined Swiss subsidiary would manage client assets
totalling almost CHF20 billion.
Commerz is also
selling its Reuschel & Co German private banking subsidiary to
Conrad Hinrich Donner Bank, a Hamburg-based private bank. The
divestment price of these three disposals was not
disclosed.
Commerzbank
additionally wants to offload Kleinwort Benson, the London private
bank, in a transaction which may come via a management buyout
rather than straight sale. Sir John Bond, the chairman of Vodafone
and Simon Robertson, the chairman of Rolls-Royce, are among a group
of City heavyweights said to be backing a potential MBO for
Kleinwort.
Swiss private
banking is likely to be increasingly caught up in consolidation, as
pressure on tax havens by the G20 makes a traditional Swiss-based
offshore banking operation increasingly unattractive, M&A
specialists say.
Ray Soudah,
founder of Swiss-based mergers boutique Millenium Group says that
falling prices for financial assets have impacted significantly on
private banks’ revenues and performance fees, causing difficulties
for firms that rely on these fees to cover fixed costs.
Further
Swiss deals likely
According to Millenium, there are currently
around 330 banks as well as about 2,600 independent asset managers
and wealth management firms in Switzerland– giving “substantial
scope” for consolidation in the country.
Finally, RBS,
another ailing bank involved in asset disposals, has sold a number
of operations, including private banking in Asia to ANZ for $550
million. The Australian bank is buying RBS’s retail, wealth
management and commercial businesses in Taiwan, Singapore,
Indonesia and Hong Kong, as well as the UK bank’s institutional
banking businesses in Taiwan, the Philippines and
Vietnam.
