More than €100 billion ($147 billion) of private banking assets
are coming up for disposal as more troubled banks in Europe seek to
sell off wealth management operations to repay state support. But
these planned disposals are resulting in a sudden over-supply of
private banking properties onto the M&A market, amid the most
depressed valuations for wealth deals in several years.
Some analysts believe that in the coming
months values could drop below the 2 percent mark for assets under
management. That compares with levels of up to 5 to 6 percent for
prime acquisitions in recent years.
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Buyers are becoming more discerning and supply
is outstripping demand, contends Sebastian Dovey, head of the
Scorpio Partnership wealth consultancy.
Ray Soudah, founder of Millenium Associates, a
Swiss-based financial services advisory, says that valuations for
private banks have fallen to “near zero goodwill levels, making it
one of the least sensible points in the cycle to benefit
financially from disposals.”
In addition, the sale of assets like Kleinwort
Benson and ING have been prompted by political rather than business
pressures.
“Ownership banks have been obliged to
undertake EU-approved restructuring programmes and have chosen to
include, untimely as it may be, private banking and wealth
management disposals at the bottom of the market.”
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By GlobalDataThe latest developments
In latest developments, Dexia is
reviewing the future of its BIL wealth arm in Luxembourg as part of
a reorganisation plan to be submitted to the European Union. Dexia,
the largest lender to municipal governments in France and Belgium,
received €6 billion in state bailouts last year. Its BIL unit has
€15 billion in client assets.
Dexia will be emulating KBC, Belgium’s largest
bank, which has decided to sell its KBL European Private Bankers
subsidiary, along with its €47 billion of client assets, to help
repay €7 billion in government injections. The sale could raise as
much as €2 billion.
That will put London’s Brown Shipley private
bank on the auction block. KBC bought the bank, which has £2
billion ($3.3 billion) under management, in 1992. The Belgian
group’s KBC Peel Hunt brokerage and corporate arm in London is also
due to be divested, amid talk that a management buyout could be on
the cards.
Brown Shipley could make an attractive
stand-alone buy for a bank wanting a ready-made foothold in the UK
wealth market, including institutions from Asia which are looking
for a wider role on the world private banking stage, analysts say.
However, KBC is understood to be looking for a buyer for the whole
KBC European Private Bankers operation in a single package.
In Germany, BHF-Bank, a unit of Sal Oppenheim,
is also being offered for sale by Deutsche Bank, Oppenheim’s new
owners after a €1 billion deal that closes in the first quarter of
2010.Sarasin and LGT are said to be among potential bidders for
BHF, which had €39 billion of client assets as of the end of
2008.
These various disposals come in the wake of
similar private banking divestments by ING and Commerzbank in
recent weeks. ING sold its Swiss private bank to Julius Baer and
its Asian operations to OCBC of Singapore.
Under instruction from the EU, Commerz has
made various disposals, including the sale of London’s Kleinwort
Benson to RHJ International, a diversified investment holding
company based in Belgium, for £225 million ($367 million) in
cash.
While banks like Credit Suisse, EFG
International, Barclays and Société Générale have previously
signalled that they are in the market for acquisitions, there is as
yet no sign of potential bidders for BIL and KBC European Private
Bankers.
The most likely suitor may prove to be Société
Générale whose largest rival, BNP Paribas, earlier this year became
the biggest private bank in the Eurozone after its €10.4 billion
acquisition of Benelux banking group Fortis. In addition, both
Dexia and KBC are Francophone-area banks, reducing their potential
attraction to banks from outside the region. Still, that may not
deter Barclays, with a traditional strong brand in France, from a
deal to expand its continental European footprint.
Meanwhile, analysts are reluctant to describe
these disposals as heralding the long-awaited consolidation of the
wealth management industry, as weaker banks seek to retreat as the
cost of servicing high net worth clients rises sharply. In latest
analysis, Booz and Company say that private banking revenues in
Britain fell by 30 to 40 percent in the last two years as assets
under management declined and trading and investing volumes
plunged, with consequent pressure on industry margins (see A
strong second half for UK industry)
