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Portugal’s Espirito Santo Family Sells Swiss Bank Assets

July 22 (Bloomberg) –- Sparring Partners Founder Bernhard Bauhofer discusses the future of the Swiss banking industry, the falling off of the banking secrecy law and its impact on investors with Mark Barton, Anna Edwards and Caroline Hyde on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

Debt woes at two companies affiliated with Portugal’s Espirito Santo family have prompted the financial dynasty to sell part of its Swiss private banking business.

Banque Privee Espirito Santo SA said it would sell its Iberian and Latin American customer assets to CBH Cie. Bancaire Helvetique SA. The two Swiss private banks didn’t provide details in their e-mailed statement disclosing the transaction late yesterday.

Banque Privee Espirito Santo, based in Pully, Switzerland, had 5.6 billion Swiss francs ($6.2 billion) of client assets at the end of December, according to a 2013 annual report. It’s owned by Luxembourg-based holding company Espirito Santo Financial Group SA, which is 49 percent-owned by Rioforte Investments SA. Rioforte, in turn, is fully owned by Espirito Santo International SA.

The Swiss sale is the latest twist in efforts by the Espirito family to untangle affiliated interests after both Rioforte and Espirito Santo International requested protection from creditors under Luxembourg law after they were unable to meet debt obligations. The debt repayments have roiled different companies bearing the Espirito Santo family name, including Portuguese lender Banco Espirito Santo SA, based in Lisbon. The stock of the Portuguese bank has plunged 66 percent since this year’s high on April 3.

Graphic courtesy BofA Merrill Lynch Global Research Close

Graphic courtesy BofA Merrill Lynch Global Research

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Graphic courtesy BofA Merrill Lynch Global Research

“We are impacted indirectly by the difficulties facing the group,” Stephane Haefliger, a spokesman for Banque Privee Espirito Santo, said by telephone. Banque Privee Espirito Santo said on July 8 that payments of some of the last maturities of short-term debt securities issued by Espirito Santo International were delayed. The delays affect “only a few clients,” the bank said at the time.

Swiss Mergers

The Swiss financial market regulator, Finma, was in close contact with Banque Privee Espirito Santo in the weeks before the sale was announced, Vinzenz Mathys, a spokesman for the regulator known as Finma, said today by telephone. Finma has no reservations about the deal as it intends to protect the bank’s clients and the transaction took place under civil law, Mathys said.

The Swiss private bank deal with CBH follows a number of exits by foreign banks from the Swiss wealth management market. The industry is ripe for mergers, Boris Collardi, chief executive officer of Julius Baer Group Ltd., the country’s third-largest wealth manager based in Zurich, said on July 21.

Julius Baer earlier said it will acquire the Swiss and Luxembourg wealth operations of Tel Aviv-based Bank Leumi Le-Israel BM. In April, Morgan Stanley agreed to sell its private banking business in Switzerland to J. Safra Sarasin Holding AG. HSBC Holdings Plc last month sold some client assets to LGT Group, the bank owned by the family of the Prince of Liechtenstein. Standard Chartered Plc is seeking a buyer for its Geneva private bank.

Photographer: Matthew Lloyd/Bloomberg

Julius Baer Group Ltd. Chief Executive Officer Boris Collardi said on July 21, the industry is ripe for a wave of mergers. Close

Julius Baer Group Ltd. Chief Executive Officer Boris Collardi said on July 21, the... Read More

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Photographer: Matthew Lloyd/Bloomberg

Julius Baer Group Ltd. Chief Executive Officer Boris Collardi said on July 21, the industry is ripe for a wave of mergers.

Tax Compliance

Some Swiss banks are re-thinking their business model after a crackdown on offshore tax evasion from foreign governments persuaded them to ask clients from countries such as the U.S. and France to report undeclared assets to their home authorities, or face their accounts being closed. The burgeoning cost of regulatory compliance and low interest rates have also crimped profits in the industry.

CBH said it took precautions regarding the tax compliance of clients being transferred, including analyzing whether any clients were liable for tax in the U.S., Cedric Zimmermann, a spokesman for the bank, said by telephone yesterday. He declined to disclose the exact amount of assets being transferred.

To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Cindy Roberts, Steve Bailey

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