J. Safra Sarasin is winding up its business in Germany, according to information obtained by finews.ch. The decision to close shop in Europe's biggest economy shows how tough that market is for Swiss banking.

Bank Sarasin and later J. Safra Sarasin spent the best of a decade trying to establish the private bank in Germany, Europe's biggest private-banking market. Until now.

The company, based in Brazil and Switzerland, is pulling out of Germany, according to two reliable sources, who both confirmed that the bank will close down the German business in 2017. The bank has a little more than 80 people in Germany, according to the annual report of 2015,

J. Safra Sarasin didn't want to comment the report yesterday.

Five Branches

Closing down the business in Germany implies shuttering five branches: the headquarters in Frankfurt and offices in Hamburg, Hannover, Munich and Stuttgart. A blow for the bank, which only a year ago confirmed Germany as a core market.

Still, the bank has had a tough ride north of the Swiss borders in recent years. It was engulfed in the «cum-ex» scandal, involving a product that Sarasin had pushed with some vigor.

The Cum-Ex Scandal

When the German tax authorities closed a loophole to stop the «cum-ex» activities, prominent Sarasin clients – including Erwin Mueller (drug store king) and Carsten Maschmeyer (co-founder of AWD) – saw their assets dwindle and sued the bank.

J. Safra Sarasin also was taken to court by investors who had been sold stakes in Windreich, a German wind energy operator, at a time when the company had already been mired in financial difficulties. J. Safra Sarasin had granted a loan of 70 million euros to Windreich.

When Brazil's J. Safra bank acquired Basel-based Sarasin in 2013, it also assumed the German problems.

Accumulating Losses

The Swiss private bank never quite made it in Germany, a country with a huge number of millionaires. It opened a network of branches but still never achieved profitability on a sustainable level.

The branch network was adjusted several times. J. Safra Sarasin in 2013 closed offices in Nuremberg and Cologne, opening instead a branch in Stuttgart.

The bank posted a profit in two out of the ten years of existence in Germany, in 2010 and 2011. That's when it still sold the cum-ex-funds. In 2015, J. Safra Sarasin had a loss of 8.8 million euros in Germany. Asset under management onshore also must have been disappointing for the bank's managers, with industry sources claiming the figure had amounted to a few billion euros only.

Germany remains a tough market for Swiss banking. Companies such as UBS, Julius Baer and Credit Suisse (CS) have poured millions into building their presence in the country, which is Switzerland's biggest trading partners.

Frequent Personnel Changes

J. Safra Sarasin also struggled because the frequent restructuring measures led to changes in personnel. German media recently reported the departure of Christian Mosel, the head of the institutional clients business in Germany.

Other departures included: Christian Vomberg, a senior portfolio manager. Christian Sammet and Karl Fingerhut in Stuttgart, leaving for a family office. A team of relationship managers headed by Alexander Diekmann in Frankfurt and Jens Wolf, the COO who left the bank in May 2016.

What Next?

The future strategy for J. Safra Sarasin remains in the dark. The bank didn't comment at all when confronted by finews.ch. Potentially, the bank may serve the very rich clients from Switzerland, in line with what CS is doing.

Switzerland's second-biggest bank three years ago sold its onshore activities to Bethmann Bank, a unit of ABN Amro.