Zurcher Kantonalbank wants to target institutional U.S. investors and is poised to expand its London-based brokerage activities to do so, finews.com has learned.
Through U.K.-regulated ZKB Securities, the Zurich-based cantonal bank sells Swiss stocks to British clients. Operational since February of last year, the six-person team led by CEO Stuart McClandish also helps Swiss firms to network with British investors or find funding for transactions.
The state-based lender now plans to expand to institutional clients in the U.S., a person familiar with the matter told finews.com. A spokesman for ZKB confirmed the news. «We are in the process of fulfilling the requirements to be able to conduct business with larger U.S. investors like asset managers,» the spokesman said.
Increasingly Niche
Hammered by post-crisis regulations as well as online competitors, the brokerage business in Europe has become a niche one. In Switzerland, very few players – including ZKB and U.S. investment bank Stifel – are still offering block trades for institutional clients.
ZKB's brokerage am is based on the exit of Vontobel, which in 2019 decided to abandon all so-called sell-side business and shut its investment bank. The team led by McClandish moved to ZKB for an undisclosed price – raising eyebrows with its local government majority owner, which doesn't want to act as lender of last resort for foreign activities.
Capital Market Complement
The bank's main business – lending – is under pressure due to regime of negative interest rates which entered its seventh year in January. This forces largely domestic lenders like ZKB to scramble for alternative sources of revenue.
Its 2014 purchase of asset manager Swisscanto was a step in this direction, and ZKB is a leading house for Swiss capital markets. Its 2019 purchase of the Vontobel brokerage activities made for a sensible complement to ZKB's existing activities.
Fresh Memories U.S. Penalty
The bank now apparently wants to enter the voluminous U.S. market, where clients tend to focus on North American securities. ZKB hopes that to tempt U.S. investors with Swiss stocks as a valuable diversifier in existing portfolios – a similar approach to several Swiss wealth managers which have won backing from the Securities and Exchange Commission to advise wealthy Americans.
The hurdles for ZKB, which still has a $98.5 million fine in the U.S. three years ago fresh in its mind, are mainly regulatory. It isn't clear how quickly the Swiss bank can set up the legal framework to begin a formal regulatory process in the U.S.
