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(Bloomberg) -- Suitors for Royal Bank of Scotland Group Plc’s international private-banking arm may use the unexpected spike in the Swiss franc as a reason to lower final bids due early February, people with knowledge of the matter said.
The currency surge makes Coutts International’s operations in Switzerland more expensive for a foreign buyer to run and erodes the value of overseas earnings, said the people, who asked not to be named because talks are private. The bids could decline about 10 percent to 15 percent, two of the people said. Coutts International may fetch at least $600 million, a person said last month.
Coutts International has drawn interest from Southeast Asia’s largest lender DBS Group Holdings Ltd., which has teamed up with Societe Generale SA, and Bank J. Safra Sarasin Holding AG, according to the people. Some potential bidders such as Julius Baer Group Ltd. have been discouraged by the exclusion of the private bank’s technology infrastructure, which RBS will keep for the U.K. operations it is retaining.
Britain’s largest state-owned lender is seeking to sell the Zurich-based international unit of Coutts as it shifts focus to wealthy clients in its home market. The franc soared as much as 41 percent against the euro and strengthened against other currencies after the Swiss National Bank allowed the currency to trade freely against the euro on Jan. 15.
Shares of Julius Baer, based in Zurich, have fallen 19 percent since the central bank move while rival private bank EFG International AG has dropped 12 percent. Spokesmen for DBS, RBS, Safra Sarasin and Societe Generale declined to comment.
UBS Group AG, the country’s biggest bank, may see annual profit shrink 14 percent due to the stronger franc, Barclays Plc analysts said in a Jan. 15 note to clients. Credit Suisse Group AG could suffer a 15 percent drop, according to Barclays.
Julius Baer CEO Boris Collardi said last week the bank is not among bidders for Coutts International. Collardi, who heads Switzerland’s third-largest lender, said a stronger franc would hurt a typical Swiss private bank as most revenue is generated from managing assets denominated in other currencies while costs are in francs.
--With assistance from Fabio Benedetti-Valentini in Paris, Giles Broom in Geneva, Richard Partington in London and Elena Logutenkova and Jeffrey Vögeli in Zurich.
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