Swiss Private Bank Deal Speculation Overblown, Vontobel CEO Says
Sept. 11 (Bloomberg) — The pace of dealmaking in Swiss private banking, prompted by higher regulatory and compliance costs and thinner margins, is lagging expectations, according to Vontobel Holding AG Chief Executive Officer Zeno Staub.
“It is happening, but at a slower pace than what you might have guessed given all the talk,” Staub told reporters at a briefing in London. “That’s not to say we would exclude an acquisition.”
Switzerland’s wealth management industry is braced for more mergers and acquisitions after concerns over the viability of Swiss offshore units already prompted foreign lenders such as Bank of America Corp., Morgan Stanley and Lloyds Banking Group Plc to sell their Swiss operations. Declining profitability and provisions for a U.S. tax disclosure program prompted more than one third of Swiss private banks to report a loss last year, according to a study by KPMG published Aug. 20.
Consultants including KPMG predict the rate of deals will increase, with shareholders of private banks questioning why they would invest in loss-making businesses. The other major global accounting and advisory firms — PricewaterhouseCoopers, Deloitte and Ernst & Young — have also said Switzerland’s wealth managers are in a shrinking market that will result in fewer firms in a country that traces its banking history to the mid-18th century.
While Switzerland remains the world’s largest hub for offshore banking, with $2.3 trillion of cross-border assets in 2013, according to Boston Consulting Group, the number of Swiss private banks fell to 139 last year from 182 in 2005. HSBC Holdings Plc sold about 12.5 billion francs ($13.4 billion), or 15 percent of its Swiss private bank’s client assets to Liechtenstein’s LGT Group in June. Royal Bank of Scotland Group Plc is considering a sale of the Zurich-based international arm of its Coutts private bank, it said on Aug. 11.
No Agreement
Frequent discussions between private bankers didn’t culminate in deals as buyers and sellers can’t agree on prices, and some sellers have unresolved legal risks, Staub said.
About a dozen Swiss banks are being investigated by the U.S. Justice Department for allegedly helping Americans hide money offshore. More than 100 others entered a DoJ program at the end of last year to try to arrange a non-prosecution agreement in exchange for providing information and paying a fine. Vontobel is participating in the program in the so-called category 3 for banks that didn’t break U.S. tax laws when advising Americans, Staub reiterated today.
Rejecting Sellers
Vontobel, which has said for at least three years it would be interested in acquiring private banks in Switzerland or asset management firms in or outside the country, has declined potential purchases “a number of times” this year, Staub said, without disclosing more details.
Building Vontobel’s investment banking, asset management and private banking businesses organically remains the priority, Staub said. RBS’s Swiss-client Coutts business would be among international private banking assets that Vontobel would most be interested in, as merging this with its own Swiss-client business may help reduce costs, he said.
“On the private banking side we would almost exclusively like to buy in Switzerland,” Staub said. “As far as I know, RBS hasn’t made a decision yet,” over whether to sell the Coutts assets, he said.
To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net To contact the editors responsible for this story: Mark Bentley at mbentley3@bloomberg.net Cindy Roberts
