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July 31, 2019

M&A activity affects smaller Swiss private banks

Takeovers in the Swiss private banking space is mainly hitting smaller banks, according to a report by PwC.

Owing to the consolidation, the number of Swiss private banks is expected to fall to 100 from 130 in the coming years.

However, the study found an “overall decline” in consolidation activity in the country’s private banking industry.

PwC said: “A look at revenues and operating costs shows that gross profits have fallen by more than 30% since the recordbreaking year of 2007, especially at small wealth management banks.

“There are several reasons for this. Clients’ expectations in terms of tailored services, individual and comprehensive advice, and greater transparency have risen. At the same time, regulatory requirements have become stricter and more complex.

“This led to many, particularly smaller Swiss wealth management banks being taken over.”

More acquisitions in the sector are said to be in the form of asset deals.

The study also revealed that M&A activity in Swiss private banking is driven by local established banks.

“The majority of Swiss buyers are established banks seeking to make better use of their platform in Switzerland and to achieve cost synergies as a result of the takeover,” PwC said.

On the contrary, foreign investors’ interest in the sector is found to be on the wane after the tax dispute.

The key reasons for this decreasing interest are regulatory constraints and high acquisition prices for Swiss private banks.

Due to the tax dispute, foreign groups were also found increasingly selling their Swiss private banking businesses.

However, after the introduction of rules including AEOI, the frequency of such divestitures has dropped, PwC noted.

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