HSBC furore puts pressure on sales of private banking units by RBS and Generali
The controversial tax practices of the Swiss private banking industry are threatening to disrupt two potential takeover deals in the sector.
Bidders for Coutts International have tried to use the recent scandal over tax evasion by clients of HSBC’s Swiss arm to lower the price of the private banking assets being sold by Royal Bank of Scotland, according to people familiar with the situation.
HSBC has found itself at the centre of a media and political firestorm after dozens of news organisations published damaging details of how it helped clients of its Swiss private bank to hide assets from the taxman between 2005 and 2007.
Credit Suisse, Union Bancaire Privée and a combination of Société Générale and DBS are among the final bidders left in the auction for Coutts International, which is expected to be valued at a premium to its book value of CHF1.2 billion.
The bidders also tried to use last month’s sharp appreciation of the Swiss franc, which hurt the profitability of the country’s private banks, as a bargaining chip, the people said.
The other deal being buffeted by tax issues is the planned takeover of BSI, the Swiss private bank of Italy’s Generali, by Brazil’s BTG Pactual.
The CHF1.5 billion ($1.58 billion) takeover of BSI was agreed by BTG last July, but has yet to close, prompting speculation that the deal could be in trouble.
A person familiar with the situation said the deal would only close once BSI had agreed the settlement of an investigation into tax evasion by the US Department of Justice that is expected to include a fine for the Swiss bank.
If the fine is above a certain amount, Generali could be on the hook to inject more money into BSI before the deal is completed.
RBS is expected to choose two bidders to enter a final round of bidding for Coutts International and aims to announce a deal as early as next week when it reports annual results.
People close to the bank pointed out that the value of bids had increased between the first round and the second round that closed last week.
Bidders for Coutts International have been given a detailed breakdown of the bank’s client portfolio in an attempt to reassure them that it does not include any potential problem cases of either tax-dodging or money-laundering.
Bidders have been told that the impact of the Swiss franc’s appreciation has been limited.
RBS plans to keep the UK business of Coutts.
All parties declined to comment.
Copyright The Financial Times Limited 2015