The sudden departure of its CFO comes at an unfortunate time for Notenstein La Roche and has put pressure on its CEO, Adrian Kuenzi. Signs are that the bank will become part of a merger or acquisition in the near future, according to information obtained by finews.com.
Disintegration isn’t a word Adrian Kuenzi (pictured below), CEO of Notenstein La Roche, would want to be associated with: «We take a decidedly different view,» he told finews.com in an interview this week.
But the word does spring to mind after Chief Financial Officer Basil Heeb abruptly jumped ship this week. It left Kuenzi with General Counsel Silvio Hutterli the sole remaining members of the executive crew that started running the fledgling private bank in 2012. Raiffeisen had spent more than half a billion Swiss francs to buy the business following the demise of Bank Wegelin.
Grand Plan Gone Wrong
In buying his own private bank, the then CEO of Raiffeisen, Pierin Vincenz (pictured below), intended to expand his traditional bank for the farming community by constructing an asset management division and to diversify the revenue structure.
Vincenz’ grand plan went wrong. His successor, Patrik Gisel, last year had to sell the expensive asset management unit to Raiffeisen’s long-time partner Vontobel by way of an emergency deal.
«Swiss Made» Doesn't Work
Notenstein La Roche isn’t making much progress itself. The private bank has barely had any growth at all in the five years of its existence. And it hasn’t shipped the promised profits to its new owners either.
Kuenzi’s strategy for a «Swiss Made» private bank doesn’t work. This has become apparent in the past two years. The CEO tried to make up for the lack of growth by cutting costs and conducting a major restructuring program.
The 4 Options Left
Heeb’s departure, the second-most important manager at the bank (pictured below), doesn’t go well with Kuenzi’s rallying call and comes at a delicate time. And it is a sign that Notenstein La Roche is in for a major strategic change. Information obtained by finews.com shows, in what direction the next steps might lead the bank.
1. Acquisition of DZ Privatbank
Notenstein La Roche and Germany’s DZ Privatbank in Zurich last year held talks about a possible merger or far-reaching cooperation. To no avail.
At the end of March, the two companies resumed their negotiations, according to sources from within the banking industry. DZ Privatbank with its German assets belongs to a cooperative society and as such would fit well with Notenstein La Roche and its owner, Raiffeisen Switzerland.
DZ has about 7.5 billion francs in assets (including money it manages as a custodian). Too little to solve Notenstein La Roche’s problems for sure, but the takeover targets which meet Kuenzi’s criteria for an acquisition are scarce.
Conclusion: A takeover of a bank such as DZ would give Kuenzi more time – removing some of the pressure on him from Raiffeisen cooperatives and CEO Gisel, whom he had promised to deliver growth.
2. Divestment to Vontobel
Gisel (pictured below) so far has resisted the option of selling Notenstein La Roche to Vontobel. He confirmed the company’s strategy of running its own private bank. But after the departure of Heeb, rumors have it that Raiffeisen might after all be willing to sell Notenstein La Roche to Vontobel, much like it did with Vescore.
Gisel didn’t comment on the speculation. But the merger of the two would make sense, because Vontobel would finally be taking a substantial leap forward with the 21 billion francs in assets managed by Notenstein La Roche.
Raiffeisen could extend the cooperation with Vontobel to include private banking. The integration would be fairly easy given that Notenstein La Roche will soon migrate to the Avaloq system. But the sale of the company also could spark concern among Raiffeisen members as the company spent a significant amount of money on the branding of the private-banking unit.
Conclusion: It takes two to tango – but if Gisel decides to sell, Vontobel surely will be in pole position. Taking that step would also seal the verdict on Vincenz’ strategy – a failure.
3. Integration Into Raiffeisen and Relaunch
Notenstein La Roche is already moving closer to its owner. Starting next year, the private bank will assume all wealth-management mandates of Raiffeisen. To take the unit under its wings would be a radical step. Raiffeisen could turn it into a luxury brand for its rich clients and the existing Notenstein customers.
Most Notenstein branches would become redundant. Raiffeisen would need to retain a few flagship stores as a display only.
Conclusion: The move would also bring about a break with the troubled present and lead to massive cost cuts. The advantage would be that the expensive branding operation would not go wasted. Unlike the migration to the Avaloq platform.
4. Continue as Before
Notenstein-La-Roche boss Kuenzi recently told finews.com, what he planned to do: having completed the cost-cutting exercise, the private bank now aims to improve its earnings structure.
Part of the plan was the centralization of portfolio management, giving relationship managers more time to meet and advise clients. The bank plans to mainly attract new clients from Raiffeisen. And thanks to Avaloq, Kuenzi expects to make further efficiency gains.
Conclusion: The plan won’t solve his problems at Notenstein La Roche. The revenue increase he needs will only materialize if he can expand the business – and this is hardly possible in today’s private-banking market.
There are two options for Kuenzi and Notenstein La Roche to choose from. A giant leap forward by way of an acquisition or part-integration into Raiffeisen – or capitulation and divestment, at a time when it would still generate a decent enough price for its owners. Staying put is simply no option.
