Private bank consolidation created new players in Asian and British wealth management on Thursday, reshaping how the rich manage their money around the world. Dutch bank ING, under pressure to restructure after receiving government bailout funds during the financial crisis, finally completed its widely expected sale of Asian private banking assets, although the buyer at $1.5 billion, a Singapore-based lender, proved a surprise.
-- ING sells Asian private bank to OCBC for $1.46bn
-- RHJ Int'l buys Kleinwort Benson for $360m
-- Lloyds talking to Rathbone Bros. over asset sale
Elsewhere, Belgian group RHJ International made a transformational deal with bailout-hampered Commerzbank to enter the British wealth management sector. Its purchase of Kleinwort Benson reunites CEO Leonhard Fischer with a business he knew from his days at Dresdner Bank, which sold the unit to Commerzbank this year.
Meanwhile, UK lender Lloyds, also facing pressure to sell assets after accepting bailout funds, said it was in talks to sell its investment portfolio management service to British wealth manager Rathbone Brothers. Of particular interest to sector watchers were the prices paid in both the done deals.
Bank Degroof said the implied 4.2 percent of assets under management (AuM) paid by RHJ seemed high, but conceded the actual figure was probably smaller. The price ING secured - 5.8 percent of AuM - raised eyebrows and won cheers from Dutch analysts who have criticised the firesale returns of previous deals.
This time, however, it was the turn of buyer Oversea-Chinese Banking Corp to justify the price paid, with its chief executive feeling compelled to say he was not "embarrassed" by the price. Both deals point to improving valuations in the once-secretive industry, where prices fell from highs near 8 percent of managed assets before the crisis to lows of nearly 1 percent at the nadir.
By comparison, the October 7 sale of ING's Swiss operations to Julius Baer was fixed at a more modest 2.3 percent of managed assets, excluding surplus capital. Though smaller in size, RHJ's purchase of Kleinwort Benson is a key deal for the Brussels-based investment group, and helped to lift its shares 8.5 percent.
RHJ, which failed last month in its bid to buy GM's European car unit, Opel, plans to use the Kleinwort Benson brand name for all of its financial services. It is the firm's first major deal since 2006 and part of a push into European financials. KBC Securities said it was the deal the market had been waiting for, and analyst Tom Simonts added.
"The deal transforms RHJI away from a fairly passive investor with a clear automotive and Japanese label towards a European investor in the financial services sector." With well-funded sector rivals also keen to expand their private banking operations, the M&A surge is unlikely to stop anytime soon.
British lender Barclays is pursuing a global top-five ranking, and the vice chairman of Barclays Wealth told the Reuters Wealth Management Summit last week its sights were set high. "There could be a major transformational buy for us," Gerard Aquilina said, pointing to firms the size of Baer or larger. Baer, however, has also not finished buying.
At the Reuters summit, Chief Executive Boris Collardi said he had already turned down five to 10 deals but was on the prowl for high-quality assets. (Two days later Baer announced its ING deal). Other names mentioned as possible consolidators include the loser in the ING asset fight, HSBC. "There are some opportunities now that didn't exist two years ago," HSBC's private banking CEO Chris Meares said at the Reuters summit.