THE RESHAPING OF THE PRIVATE BANKING MARKET

Last year was full of major moves marking the resurgence of mergers and acquisitions within the wealth management sector globally. Just as a reminder, you will find below some examples of mergers that took place in 2020:

United States

Banco BBVA signaled its retreat from North America by agreeing to sell its US assets to PNC and Goldman Sachs acquired United Capital, a tech-based wealth manager. And even more recently, Boston Private has been sold to SVB Financial

Switzerland

Landolt & Cie merged with Oddo BHF, Reyl & Cie was acquired by Intesa Sanpaolo and Paris Bertrand joined up with Rothschild & Cie.

Elsewhere

FWM Holding joined forces with Stanhope Capital and, in Spain during the summer, CaixaBank announced a merger with Bankia. In France, Meeschaert was sold to the investment fund, LFPI.

Furthermore, in terms of larger transactions there has been also talk of a potential merger between Swiss banks Credit Suisse and UBS, with speculation also surrounding a possible deal involving France’s BNP Paribas and Société Générale. In Italy, there are rumors that Banca Monte die Paschi di Sienna could be bought by Unicredito. The market is boiling.

In reality it all started a decade ago with the fallout of the 2008 financial crisis. This is when the race to acquire assets truly began.

From 2012 until 2016, we saw a surge of deals in Switzerland (Safra/Sarasin; UBP/Coutts and Lloyds; Syz/RBC; Julius Bär/Merrill Lynch…) and elsewhere. There are multiple explanations for these mergers. Some players wanted to move out of non-strategic markets (Crédit Suisse for example in the US or Société Générale in Belgium). Many wanted to gain market share (Julius Bär, Safra and UBP are salient examples of this is Switzerland), whilst others needed to merge so they could overcome increasing IT, compliance, and regulatory costs. Indeed, the low interest rate environment has put continued pressure on financial institutions to consolidate.

As we look at the development of the wealth management industry in 2021, we can identify the following categories:

  • Universal banks (Citi, JP Morgan, HSBC, UBS…) who use their balance sheet for lending and offer a broad range of private and corporate
  • services;
  • Pure players (Pictet, Lombard Odier, Julius Bär, Rothschild…) focused on asset management and with a history of tradition;
  • Small boutiques (Bessemer Trust, Mirabaud, Bordier, Degroof, …) who are niche players emphasizing their personalized approach;
  • Multi-family Offices (Stonehage Fleming, Iconiq Capital, Bedrock, Notz Stucki…) offering flexibility and a role of “trusted advisor”;

But we also seeing the arrival of a new breed: fintechs, roboadvisors and platforms such as Marcus (Goldman Sachs). I strongly recommend the following article – “Is Goldman Sachs the Blueprint for Wealth Managers?”– which explains in detail their wealth management strategy. The leading technology groups also have a strong appetite to enter the industry and have major competitive advantages both in terms of cash and innovation.

The impact of corona virus has led to an acceleration of these trends and will lead to further market concentration. In the UK, the impact of Brexit will also be felt as UK based private banks will have to establish a new strategy to develop their activities in Europe. Consequently, consolidation in the sector will only accelerate in 2021 which is why Norman Alex has taken the decision to reinforce its corporate development activities. For more information, please contact me at jcourville@normanalex.com.

Jérôme Jouanneau-Courville
Senior Partner at Norman Alex.

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