Published by WealthBriefing – 6th December 2016
The trend of Western lenders selling Asian private banking operations continued with the ABN AMRO transaction today.
Liechtenstein-headquartered LGT has agreed to buy the private banking businesses of ABN AMRO in Hong Kong, Singapore and Dubai, which together hold around $20 billion of client assets under management. The transaction is yet another example of how some non-Asian lenders have sold off private banking operations amid a bout of M&A activity in recent years.
Financial terms of the acquisition were not disclosed by the banks in their statements today.
LGT said its acquisition will take the form of an asset purchase, which means it expects to increase its assets under management to more than $40 billion in Asia and to approximately $160 billion overall.
“The [acquired] business has been profitable throughout the cycles and offers strong potential for further long-term growth,” LGT said.
ABN AMRO’s operations in Asia were established nearly two centuries ago in 1826. The client portfolio includes wealthy families, private investors and institutions across regional markets in Hong Kong, mainland China, Taiwan, Indonesia, Malaysia, Singapore and the Middle East.
ABN AMRO, which was bailed out by the Dutch state amid the financial crisis of 2008 and is being prepared for a full return to the public listed market, is the latest example of a European bank to have pulled out of Asian private banking. In a period of about two years, Societe Generale, Barclays and ANZ have sold private banking operations to local banks (SocGen to DBS, Barclays to OCBC and ANZ to DBS). Banque Internationale à Luxembourg has shuttered its Singapore operation. In such cases, the banks often say that for all their commitment to doing business with Asia in some way, maybe via joint ventures or partnerships, private banking has been insufficiently profitable to justify the expense and toil of building a business directly.
On the other hand, some firms, such as Zurich-listed Julius Baer, which calls the region its second home market, are committed to Asia. UBS and Credit Suisse are big players making Asia a key part of their strategy, while firms as varied as Citigroup, Standard Chartered and BNP Paribas have significant footprints. HSBC, a bank with deep roots in Asia, is a major name. Meanwhile, Union Bancaire Privée, the Geneva-headquartered private bank, bolstered its Asia business by accumulating assets of Coutts in Asia more than a year ago.
Northwest Europe
ABN AMRO said it wants to strengthen private banking activity in Northwest Europe, close to its home turf. Jeroen Rijpkema, chief executive of ABN AMRO Private Banking International, said private banking is a “a core activity” for the group.
“The transfer of our private banking business in Asia and the Middle East is the logical next step in implementing this strategy. We are happy to have found in LGT a strong and solid partner to ensure continuity of service in the best interest of our clients and staff involved,” he said.
The $20 billion in AuM run by ABN AMRO Private Banking in Singapore, Hong Kong and Dubai accounts for 10 per cent of the private bank’s client assets worldwide.
The transaction is subject to approvals from the relevant authorities and closing is expected in the second quarter of 2017. ABN AMRO expects to realise a substantial book gain.
In Asia, the Netherlands-headquartered bank said it will continue to offer financial services to its corporate banking clients active in sectors including energy, commodities and transportation, diamond and jewellery, and clearing.
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