Dealmaking among Swiss private bank is slowing, and mergers and acquisitions are becoming more complex and intricate. Some former buyers have switched to the selling side.

The theme underpinning the current wave of consolidation among finance firms in Switzerland is the abundance of potential buyers. Credit Suisse, Julius Baer, Vontobel, Notenstein La Roche, Bank Syz and foreign firms like Société Générale Private Banking or Crédit Agricole-owned Indosuez Wealth Management want to grow in Switzerland, in part by buying up rivals.

What about the few private banks willing to sell? The merry-go-round of potential candidates has slowed, after several foreign firms offloaded their wealth management activities. Morgan Stanley, Royal Bank of Canada, Coutts International and Bank Leumi have all sold to Swiss firms.

Three-Facetted Deals

Wealth management deals in Switzerland have emerged in three categories: tiny to tiniest private banks, independent asset managers and client portfolios.

The most recent example? The sale of Zurich-based private bank Dominick: the Swiss bank's roughly 500 million Swiss francs under management went to Schwyz-based pension fund Tellco. The unconventional deal illustrates that private banking is seeking the niches: Tellco wants to create Switzerland's first pension-focused bank. 

Buyer Gets Integrated

Hyposwiss' acquisition of Zurich's Fimanor to strengthen its activities in Israel is another example: tougher regulation in Switzerland has left many independent asset managers with little choice but to make hard choices about their future.

WMPartners, for example, bought independent Zurich asset management Wergen&Partner earlier this year, only to become a victim of the same circumstances just months later, when parent Julius Baer scrapped the unit's go-it-alone plans in favor of integrating it.

Tip of Iceberg

These transactions are just the tip of the iceberg: in Switzerland, most deals are still conducted behind closed doors without becoming public – or they don't happen at all.

Bank insiders report that consolidation has become far more complicated: many small private banks' and independent asset managers' client books are flecked with offshore clients of various nationalities.

Unstructured portfolios such as these aren't attractive to snap up because they force the buyer to filter out its preferred markets.

Stuck with Liquidation

In case a buyer is only interested in a certain segment, the onerous task of liquidating many client relationships and the bank itself remains. This costs time and money, and runs counter to the quick bulk-up that many are seeking.

Bankers report, for example, that Eric Sturdza is looking for a new major shareholder for the eponymous private bank. Banque Morval has also been looking for a way out of its current business conundrum for some time, after getting squeezed by negative interest rates and increasing regulation.

Notenstein Rounds Out Book

At around 2 billion francs in assets, the prospects of a tie-up or merger hinge almost exclusively on the quality of the target's client book.

While Swiss consolidation is currently centered around Geneva, one candidate remains the persistent source of banker speculation: Notenstein La Roche. Last week, finews.com reported exclusively that Notenstein La Roche is selling its Eastern European portfolio to rival Vontobel.

Notenstein, a bank with the goal of growing by acquisition, has suddenly switched to the selling side, at least of certain assets.

Notenstein a Seller?

The private bank's sale has done little to temper the appetite for Notenstein's 14 billion franc Swiss book. Ironically, Vontobel's interest in acquiring all of Notenstein is an open secret in Zurich's close-knit banking circles.

Julius Baer is another potential buyer for Notenstein La Roche: the St. Gallen-based private bank would bolster its far larger rival's business in Switzerland, where Julius Baer hasn't been strong, in one fell swoop.

Julius Baer a Buyer?

finews.com has learned that CEO Boris Collardi made advances to Notenstein's owner, Raiffeisen, but was gently rebuffed by the Swiss cooperative bank, which is run by Patrik Gisel. Raiffeisen wants to stick with its strategy of owning an independent Swiss private bank – for now, at least.

Notenstein's exit from eastern Europe, which comes as the private bank suffers an exodus of talent in recent months, can be interpreted several ways.

The most obvious? If Notenstein keeps offloading portfolios outside of Switzerland, the bank will be conveying that it is sprucing itself up for an outright, entire sale.