After the speculation, the deal was done, and the Swiss private bank snapped up the non-UK part of Coutts. So now the real task of making the acquisition a success begins.
Why? Because anyone who has been paying close attention to Geneva-headquartered UBP will have seen how this bank has been determined to grow into one of the top-rank “standalone” private banks. When this publication spoke less than a year ago to Michel Longhini, its private banking head, he made it very clear that acquisition was part of its strategy of pushing ahead to build scale – a key issue at a time of rising cost burdens in the business. (See that interview here.)
So with the Coutts acquisition agreed, this publication grabbed a chance to talk to Longhini again – not in Geneva, but this time in Singapore at UBP’s smart offices that overlook the Asian city-state’s gleaming financial district. And the location is no accident: Singapore, and the wider Asia-Pacific region, is a big part of UBP’s plans and a reason why it bought the Asia-based business of Coutts (as well as the Coutts business in Switzerland).
Inevitably, a question that has to be put is how confident is UBP that it can persuade the clients as well as staff of Coutts to come across and keep attrition rates down. Industry-watchers will, for example, want to see how the deal compares with other M&A deals such as ABN AMRO's purchase of the German business of Credit Suisse, Julius Baer's Merrill Lynch deal and DBS's acquisition of the Asia private bank of Societe Generale.
“We expect to have a smooth transfer in Asia and bringing in almost all the infrastructure and we trust attrition will be limited. In Zurich, we don’t expect a lot of overlaps and we are confident that we have done the necessary due diligence on Coutts. There were already strategic moves started by Coutts several years ago [to deal with regularising accounts] and these will be completed in June this year,” Longhini said.
UBP hasn’t disclosed how much it has paid for the Coutts business – although this publication understands that some media speculation that it paid up to $800 million for the Coutts business is way above what was actually paid. Recent analysis by Scorpio Partnership, the consultancy, and others, has suggested that banks are currently forking out about 2.1 per cent on average for the AuM they buy – it appears that UBP paid less than that.
Longhini said that because Coutts had been regularising Swiss accounts and dealing with other issues, he and his colleagues were not expecting unpleasant surprises. And in general terms, he said he is pleased that the additional SFr30 billion (around $31 billion) of assets, with a sizeable chunk (slightly less than half) coming from Asia, will take UBP to an important level.
“It dramatically adds to our presence in Asia,” he said. “The coverage in Switzerland and Eastern Europe [of the Coutts business] is complementary to existing markets. A lot of skill and competence is coming into the team,” he said.
The achievement in building scale in Asia is an important one; Longhini, who had previously been at France-listed BNP Paribas in Asia before coming to UBP, will have noted how, last year, France’s Societe Generale decided to sell its Asia private bank to Singapore-listed DBS because the bank hadn’t been able to achieve the critical mass of AuM in the timeframe it had wanted. For Longhini, as he has previously explained, getting to a critical mass of AuM is crucial at a time when cost pressures weigh particularly hard on smaller players.
He knows, he said, that the crucial phase in any M&A transaction is getting a solid “buy-in” from the staff and clients of the acquired bank. Longhini met this publication only about two weeks after a period of meeting almost all of the 140 relationship managers at the acquired Coutts business. It is an exhausting process, but necessary.
“When clients know the bank is being bought they will have questions: `What do you [the banker] think? How comfortable is the RM with the buyer; sometimes acquisitions fail because people from the seller cannot be integrated,” Longhini said.
“In a service-based and relationship-based model it is important to keep a team….our track record on that has been good,” he continued.
Asked about “re-papering” or “re-onboarding” of clients, Longhini said: “In our experience we have kept it extremely smooth…We think for Coutts in particular all the hassle of re-opening accounts will be extremely limited,” he continued.
UBP has processed a number of acquisitions in recent years, and Longhini hopes the experience of this willstand it in good stead in making the Coutts people feel welcome. In 2011, UBP bought the Swiss arm of ABN AMRO; in May last 2013, it bought the international private banking segment of UK-listed Lloyds Banking Group (it has, as a result, since set up UBP-branded operations in Monaco and Gibraltar). It has added hedge fund assets via M&A also and bought a book of business from Santander.
“For example, with Lloyds or other deals, we have been able to really maximise the integration and limit attrition,” Longhini added.