A first in Swiss banking: a pension fund is buying up a private bank in Switzerland with a view to creating a pension-focused bank.

It stands out among the raft of recent deals in Switzerland: Tellco Vorsorge in central Switzerland is buying Zurich-based Dominick Private Bank. Together, they will become Switzerland's first pension-focused bank, the two said in a statement on Tuesday.

While consolidation has been rife among private banks in recent years, the move marks the first time a pension fund has entered the space. Switzerland's $800 billion cash-rich pension fund industry is increasingly encroaching on banks' turf.

Cradle to Grave

Tellco is a considerable Swiss pension fund player whose 130 employees provide pension and wealth services for private and institutional clients, as well as a real estate arm.

The merger will create a bank with more than 6.5 billion Swiss francs under management – the larger portion of which has been brought into the union by Tellco. 

A closer look at the details reveals the strategic savvy of the deal: a «pension» bank can differentiate itself in a crowded private client market with services «from cradle to grave» for a client's entire life span.

Tellco's Takeover

A statement from the two is careful to note that Dominick Bank's management will remain in place and complement the pension fund's executives. Nevertheless, it is clear far larger Tellco and its Chief Executive, Philippe Moser, will have more influence after Dominick is integrated. 

At home in Zurich's hip Seefeld lakeside neighborhood, Dominick never made it into the ranks of Swiss banking's most notable players. Its balance sheet is 71 million francs, but it doesn't disclose any information on managed assets.

The bank recently released a half-year report (in German) disclosing a profit of 345,000 francs, mainly due to write-downs and impairments. 

Meager Profits

A glut of regulation for private banks has left its mark, and the burden of liability on the partners will have also been an impetus to give up the business. The bank has eked out a modest profit since 2008, Chief Executive Roland Straub told finews.com.

Dominick, founded in the 1990s, is also specialized in pension fund management under CEO Straub and major shareholders PeterKennedy, Eric von Graffenried and Hans Joerg Saegesser.