HSBC Private Bank (Suisse), the Swiss subsidiary of Hong/Kong London-listed banking giant HSBC, has agreed to sell a portfolio of its private banking assets in Switzerland worth $12.5 billion.

HSBC Private Bank (Suisse), the Swiss subsidiary of Hong/Kong London-listed banking giant HSBC, has agreed to sell a portfolio of its private banking assets in Switzerland worth $12.5 billion to Liechtenstein's LGT Bank (Switzerland), as part of its strategy to streamline its business in the US and Europe.

A spokesperson for HSBC told this publication today that the number of customers served by the private bank in Switzerland would be reduced from around 150 countries to about 70 in a deal that completed the “strategic positioning” of the Swiss private bank, “aligning” it with the group footprint.

“The sale forms part of the private bank and group’s strategy for core and network markets, focussing on upper high net worth and ultra high net worth clients. Switzerland is one of our priority markets and along with Hong Kong will remain the most important booking centre for global private banking,” the spokesperson said.

The transaction, which is subject to regulatory and other approvals, is expected to be completed in the last quarter of 2014, HSBC said.

The sale follows a strategic business review by HSBC which has seen it shed a number of businesses globally as it seeks to concentrate its growth on a focused group of markets.

The move is also a sign of continued busy M&A activity in the European wealth management arena, including Switzerland, as firms look to sell businesses that have become unprofitable, sometimes in the face of increasing pressure on Swiss bank secrecy laws and legacy issues associated with them.

HSBC said that the sale represented “further progress” in the execution of HSBC’s overall strategy and that the group remained “fully committed” to Switzerland as a key international centre for its global private banking business.

Upon closing, the acquired business will be integrated into LGT Bank (Switzerland), which had assets under management of SFr21.0 billion ($23.5 billion) at the end of 2013.

HSBC and LGT said that around 70 HSBC employees will transfer as part of the deal.

The deal includes assets from a number of regions, including Central and Eastern Europe, Latin America and Western Europe. A smaller part of the portfolio relates to clients advised by Swiss-based external asset managers.

“It is a high quality portfolio which fits with our growth strategy and complements our existing operation in Switzerland,” a spokesperson for LGT said.

Restructure
HSBC has been through a heavy period of restructuring and cost-reduction. Last year, the bank began to dispose of, or close, 20 “non-strategic” businesses, bringing the total of such moves to 63 since 2011.

The private banking arm of HSBC logged a pre-tax profit of $193 million in 2013, slumping by 79 per cent a year before as restructuring costs hit the figures, although the financial services giant as a whole saw a pre-tax profit of $22.565 billion, up 9 per cent.

While the parent bank has been hit – like some of its peers – with costs associated with issues such as anti-money laundering controls – its private bank has restructured, slimming down the number of booking centres and exiting some jurisdictions in a bid to sharpen long-term profitability. In the short-term, however, the process has hit profits.

Amid an environment of increasing regulatory costs and falling profits, there have been a number mergers and acquisitions in Switzerland in the past year. For example, Credit Suisse has bought part of the non-US wealth management business of Morgan Stanley; Julius Baer has bought the non-US wealth arm of Bank of America Merrill Lynch, while Lloyds Banking Group has sold an international private banking arm to Union Bancaire Privee. Generali, the Italian insurer, has put Lugano-headquartered BSI up for sale, reportedly. There are more than 300 banks in Switzerland – a number that has fallen from around 375 around 2000, according to the Swiss Bankers Association.