Lloyds Banking Group Plc (LLOY), Britain’s biggest mortgage lender, agreed to sell its international private-banking business to Swiss wealth manager Union Bancaire Privee for as much as 100 million pounds ($151 million) in cash.
Lloyds will receive about 65 million pounds when the deal is completed and 35 million pounds over a two-year period, depending on performance, the London-based bank said in a statement today. The sale of the business, which had 7.2 billion pounds of assets under management at the end of March, will include operations in Geneva, Zurich, Monaco, Gibraltar and Montevideo. The business in Miami will be sold to Banco Sabadell SA (SAB) for as much as 8 million pounds in cash, it said.
Lloyds Chief Executive Officer Antonio Horta-Osorio, 49, is seeking to strengthen the firm’s balance sheet by selling assets, cutting costs and eliminating jobs following the lenders’ government bailout in 2008. The bank said last week it will seek to raise additional capital required by the Prudential Regulation Authority by shrinking its operations rather than tapping shareholders.
Britain’s lenders have been selling units and seeking ways to bolster their businesses since Bank of England Governor Mervyn King said in November he was concerned that they weren’t holding enough capital. The PRA, a unit of the central bank, had ordered U.K. lenders to plug a capital shortfall of 25 billion pounds by the end of the year.
Lloyds last week sold a stake in St. James’s Place Plc for about 450 million pounds, the second such move since March, when it raised gross proceeds of 520 million pounds. It’s also mulling a sale of Scottish Widows Investment Partnership.
The disposal this month boosted Lloyds’s core Tier 1 capital ratio, a measure of financial strength, by 16 basis points to about 8.26 percent. The bank is seeking to increase the level to more than 9 percent by the end of the year and 10 percent by the end of 2014.
Today’s sale will add to capital “though not on a material level” for the group, Lloyds said in the statement. The transaction is subject to conditions including regulatory approval, with the majority of the business expected to transfer in the second half of this year and the remainder by the first quarter of 2014, it said.
Chancellor of the Exchequer George Osborne is seeking to reduce taxpayers’ 39 percent stake in Lloyds before a general election due in 2015. Osborne, constrained by the toughest austerity program since World War II, could use the proceeds of a sale to fund tax cuts or more spending before the vote.
Earlier this year, the Treasury reduced the price below which it would recognize a loss from selling its stake to take into account fees the lenders paid, officials with knowledge of the matter said in March. Lloyds shares have advanced 27 percent this year, trading above the 61 pence price at which the government says it will break even on its holding.
UBP, a Geneva-based wealth manager founded by Edgar de Picciotto, is rebuilding through acquisitions after customer assets slumped 55 percent between 2007 and June 2011. UBP integrated ABN Amro Bank NV’s Swiss unit in 2012 and added $3 billion of assets by purchasing Nexar Capital Group, an alternative investment manager based in Paris and New York.
“This is a key step in the execution of UBP’s strategy to grow its global presence and to expand its private-banking activities,” the firm said in an e-mailed statement. UBP increased assets under management 4 percent to 83.2 billion Swiss francs ($86 billion) in the first four months of the year, according to the statement.
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