Europe's big banks are triggering a silent shake-out in the staid world of private banking - which services wealthy clients - by snapping up small assets and consolidating their hold on a high-profit niche. In the past weeks and months, the world's largest wealth manager, Swiss bank UBS AG, has gobbled up small assets in Germany and the United States, adding to a string of purchases earlier this year and last.
Similarly, French giant BNP Paribas, has snapped up assets in Switzerland and Monaco and remains, like UBS and other big-league rivals, open to more.
"With each operation, we see the potential to grow in a market where we already have a presence," said Olivier Coenon, head of development at BNP Paribas' private bank, speaking to Reuters by telephone.
"We are going to integrate what we have bought already, but we are still fundamentally interested in more," he said.
The purchases, though small individually, quickly add up. BNP has seen managed assets in the private bank grow from 96 billion euros ($127.5 billion) at the end of 2003 to 101 billion at the end of September this year. The recent acquisitions should increase that by up to 3 billion euros, Coenon said.
Not to be left out, Societe Generale said this week that it, too, is open to small acquisitions, confirming what industry experts say is a controlled scramble into the high-margin business of managing wealthy people's money.
"Everybody is fundamentally open to acquire," said Christian Gomez, chief executive of Societe Generale's Swiss operations, speaking of big financial groups in an interview on Wednesday in Swiss paper Finanz und Wirtschaft.
SocGen last year bought Swiss private bank Compagnie Bancaire Geneve, joining a long line of big banks like Deutsche and RBS to push their way into the wealth management sector over the past two years.
UNDER THE RADAR: Analyst Jacques-Henri Gaulard at Merrill Lynch said the flurry of small buys could prove substantial in the end.
"It is our belief that BNP Paribas' private banking and asset management division could provide positive surprises in 2005 and 2006," he said in a recent research note.
The purchases have lessons for small- and mid-sized wealth managers as well.
Rising regulatory costs and some questionable business models mean that consolidation pressure in the industry is not about to let up, said Ted Wilson at UK private banking consultancy Scorpio Partnership.
Small banks may survive by offering a high level of personal service. And large private banks may enjoy economies of scale, he said.
But that leaves medium-sized banks like Julius Baer, which sold its US private client business to UBS earlier this week and launched operations in neighbouring Germany, instead.
"The banks in the middle don't have either advantage," Wilson said. "There's increasing pressure from a compliance and regulatory point of view. Their overheads are constantly being driven up."
Earlier this week, BNP bought certain Citigroup customers based in Switzerland with 2 billion Swiss francs ($1.73 billion) in assets and CaixaBank Banque Privee with 460 million francs. In September, BNP bought Societe Monegasque and Bank von Ernst (Monaco), which together managed around one billion francs.
In recent weeks, UBS has bought the US private clients business of Swiss rival Julius Baer with $4 billion in assets, and Germany's Sauerborn Trust with 6 billion euros.
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