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EFG expands into Australia as it swings back to profit

Swiss private bank EFG International has agreed to buy a 51% stake in Shaw and Partners, an Australian financial services firm.

Shaw and Partners has six branches in Australia and adviser headcount of nearly 150.

The firm managed A$15.9bn ($11.2bn) in assets at the end of February 2019.

As part of the deal, Shaw and Partners co-CEOs Earl Evans and Allan Zion will retain their executive roles.

Together, the pair will also own a 25% stake in the business.

The cash-stock deal involves a maximum consideration of A$61m.

EFG will pay 70% of the deal amount at closing. The remainder will be paid in tranches over the next two years.

The deal is said to be mutually beneficial, enabling Shaw and Partners to broaden its investment solutions.

On the other hand, the takeover is anticipated to bolster EFG’s penetration of the Chinese offshore HNWI market in Australia.

The Swiss bank expects the deal to be accretive to earnings per share from the first year and have marginal effect on its capital ratios.

Pending regulatory nod, the transaction is expected to complete in the second quarter of this year.

According to EFG CEO Giorgio Pradelli, the deal aligns with the firm’s plan to prioritise markets with superior growth potential.

Pradelli said: “The combination of Shaw and Partners’ well-established domestic business with access to EFG’s strong international product offering will allow both of us to leverage growth opportunities in this key region.

“The combined growth potential of this partnership will enable us to double our size in the Asia Pacific region by 2022.”

Meanwhile, EFG posted a profit of CHF70.3m in 2018, versus a loss of CHF59.8m last year.

The loss in 2017 was driven by EFG’s integration with BSI Bank, which was embroiled in the 1Malaysia Development Berhad (1MDB) state fund scandal.

Compared to the previous year, underlying net profit at the group increased 16% to CHF191.8m.

Assets under management at EFG totalled CHF131.2bn at end-December 2018, down 8% from CHF142bn in 2017.

The fall was said to be the result of difficult market conditions and exchange-rate swings.

However, the assets increased to CHF146.4bn, boosted by the acquisition of Shaw and Partners.

Underlying net new assets during the year were CHF2.5bn.

Underlying operating expenses dipped 6% year-on-year to CHF966.4m.

With the return to profit, EFG intends to raise the dividend to CHF0.30 per share from CHF0.25 per share.

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