New bank targets moderately wealthy clients

Sarasin and AIG want to expand in eastern Europe swissinfo.ch

Swiss bank Sarasin and AIG Private Bank plan to create a new bank targeting affluent clients with up to SFr500,000 ($410,000) to invest.

The collaboration will pool 235,000 existing clients and SFr8 billion of assets, with plans to expand into eastern Europe. The new bank, as yet without a name or location, could be running by the end of 2008.

Basel-based Sarasin will own 57.5 per cent and AIG 42.5 per cent in the new venture, which requires approval from the Swiss Federal Banking Commission. The SFr500,000 threshold ensures that the new bank will not poach wealthier clients from either of its owners.

The move comes against the background of growing consolidation in an increasingly cutthroat and lucrative banking sector as rivals compete to manage the assets of the wealthy.

While the collaboration is not nearly as big as the merger of four Credit Suisse owned banks into Clariden Leu last year, AIG chairman Eduardo Leeman told swissinfo that consolidation was essential.

“It is totally clear today that consolidation is needed. It is becoming increasingly difficult to operate with cost-income ratio rocketing,” he said.

“It will be easier to expand our business in eastern Europe with critical mass and we will be able to really focus on the affluent market. This group of clients has huge potential and is not very well served at the moment.”

Some 90 per cent of Sarasin’s affluent clients are resident in Switzerland, while AIG has a similar client base in Germany. Both have a small foothold in Austria.

Sarasin, controlled by Rabobank of the Netherlands since January, launched its own personal banking initiative in 2004 targeting affluent, but not super-rich, clients.

New focus

By pooling their affluent clients under one roof, both banks can now concentrate more fully on their core business of taking a slice of the ultra-wealthy (more than SFr1 billion of investable income) asset management business.

“This move allows them to put less focus on the affluent client sector, possibly because they have capacity constraints [and] focus on their core business of wealthy clients,” Bank Cheuvreux analyst Christian Stark told Reuters about Sarasin.

The new bank will target the 15 per cent of European households that represent 60 per cent of the area’s wealth in the affluent category (SFr100,000 to SFr500,000).

It expects to earn annual gross income of some SFr100 million in its first year, double assets under management within three years and open around 4,000 new accounts a month, the two banks said.

Profits will be distributed according to the stake each bank holds in the venture.

Bank Sarasin’s Marco Weber will become chief executive of the new bank with Niklaus Siegrist of AIG as his deputy.

Sarasin had SFr73.3 billion of wealth under management at the end of 2006 and plans to increase this to SFr100 billion by 2010. AIG aims to manage $20 billion (SFr24.34 billion) of assets in five years.

swissinfo, Matthew Allen in Zurich with agencies

Key facts

Global private wealth rose from $30.7 trillion in 2004 to $33.3 trillion in 2005. It is expected to grow to $44.6 trillion by 2010, according to some estimates.
Switzerland managed $4.4 trillion of that in 2005 rising to an estimated $4.77 trillion last year, with UBS and Credit Suisse leading the way.
At the end of 2005 there were a total of 337 different banks in Switzerland, compared with 484 in 1990.
A recent spate of consolidation has seen some 60 acquisitions and mergers of Swiss institutions in the last five years, according to the Swiss Bankers Association.

In brief

Bank Sarasin’s origins date back to 1841, when Johannes Riggenbach-Huber founded a company referred to as a “mercantile business”, concerned with, among other things, financial transactions.

Netherlands-based banking cooperative Rabobank took a 28% stake in 2002 and increased this to a controlling 46% hold in January this year.

AIG Private Bank comes under the umbrella of American International Group, the world’s largest insurance company.

The private bank was established in Zurich in 1965. It also has branches in Geneva, Singapore, Honk Kong, Shanghai and Sao Paulo.