May 24, 2018 / 5:46 AM / 3 months ago

Vontobel's move for Notenstein shakes up Swiss private banking

ZURICH (Reuters) - Private bank Vontobel (VONN.S) is buying smaller competitor Notenstein La Roche from Swiss cooperative bank Raiffeisen [RFSHW.UL] for $705 million, the first in what industry insiders expect could be a new wave of consolidation in the sector.

The logo of Swiss private bank Notenstein La Roche is seen at a branch in Zurich, Switzerland May 24, 2018. REUTERS/Arnd Wiegmann

The number of Swiss private banks has fallen sharply over the last decade as lenders to the world’s wealthiest people contend with tougher regulations and a changed environment following a global clampdown on tax evasion.

Analysts say wealth managers must cut costs or buy up competitors in order to survive. But high valuations and legacy issues have hampered deals from taking off.

Vontobel, in a joint statement with Raiffeisen, said it had agreed to buy Notenstein La Roche for 700 million Swiss francs ($705 million). Notenstein La Roche manages 16.5 billion francs for primarily Swiss customers and the acquisition will boost Vontobel’s client money by nearly a third.

“We’re convinced this is a very high-quality asset,” Chief Executive Zeno Staub said at a joint news conference with Raiffeisen in Zurich. “It’s rare to find such a well-concentrated, future-oriented and (clean) book.”

The acquisition should start to boost profitability from as early as next January, Staub said, adding he hoped it would help the group exceed its current 2020 goals.

The banks expect the sale to be completed in the third quarter subject to regulatory approval.

Shares in Vontobel were up 1.8 percent at 1143 GMT, outperforming a 0.3 percent dip in the European banking sector index .SX7P.

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UNFULFILLED AMBITIONS

Raiffeisen, Switzerland’s third-largest bank, is dealing with the fallout of a breach of trust probe into its former chief executive Pierin Vincenz, who is in police custody while under investigation in Zurich.

Primarily a retail bank whose 1.9 million customers are cooperative members, Raiffeisen said it was selling Notenstein La Roche to focus on its own brand, aiming to further boost its investment business.

It conceded that its ambitions to crack the market for the ultra-wealthy following its 2012 purchase of Notenstein and 2015 purchase of La Roche had not materialized as planned.

“We had to acknowledge that our private banking ambition couldn’t be fulfilled,” Raiffeisen Chief Executive Patrik Gisel told the news conference, adding Notenstein La Roche was in a good position following initiatives undertaken last year but had nonetheless continued losing assets and customers.

Raiffeisen has recently focused on trimming down Notenstein La Roche to focus more on its home market and reducing costs, as well as migrating to a new core banking platform.

Gisel said the bank had held in-depth talks with four interested parties, both Swiss and international, after deciding earlier this year to put the private bank up for sale.

“After initial discussions, we were surprised how positively the market reacted and what prices were available,” he said.

Vontobel plans to issue a new Tier 1 bond in June with a nominal value of 350 million-450 million francs to help finance the deal.

Reporting by Brenna Hughes Neghaiwi; Editing by Mark Potter and Susan Fenton

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