Banque Baring Brothers Sturdza SA, the Swiss private bank overseeing the wealth of tennis players, soccer stars and other athletes, purchased Coges Corraterie Gestion SA, an asset manager, to pool services for clients.
“It’s a very interesting combination,” Eric Sturdza, president of the Geneva-based bank he established with the descendants of John Baring in 1985, said in an interview at the firm’s offices on Geneva’s priciest shopping street, Rue du Rhone. “We share the same values and ethics.”
Swiss banks and money managers are competing for assets and considering mergers as revenue slides and increasing regulatory and compliance costs crimp profits. Private banks dropped to 161 in 2011 from 176 in 2006, heralding a gradual consolidation process, PricewaterhouseCoopers AG in Zurich said in a report last month.
While Baring Brothers Sturdza has excess capital it won’t seek further acquisitions after the Coges deal and wants to emulate the success of the Morgan Motor Co. Ltd., the U.K. maker of hand-crafted sports cars, by staying small, Sturdza said
“Morgan stuck to its values in a niche market and they’re still there and thriving,” said Sturdza, a collector of sports cars and sponsor of an eight-time winner of the Le Mans 24-Hour race, Tom Kristensen. “Every year there’s a big waiting list.”
The future of Swiss wealth management hinges on firms delivering services to clients that merit the fees, instead of those that accumulate assets in the pursuit of higher earnings, said Sturdza, who declined to disclose his firm’s funds under management or details of the transaction announced today.
Big banks have come undone by ignoring clients’ interests in their quest for profit and that’s the wrong model for a wealth manager, he said, citing the $59.2 billion bailout of UBS AG, Switzerland’s biggest bank, and the $45 billion rescue of New York-based Citigroup Inc., Sturdza’s former employer, in 2008 as examples.
Sturdza, 69, has run the Baring Geneva unit since leaving Citibank in 1985. London-based Barings, which began 250 years ago, was brought down in 1995 when rogue derivatives trader Nick Leeson lost about $1.3 billion through unauthorized bets. Dutch bank ING Groep NV acquired it for a token 1-pound fee.
The scandal, which scarred the City of London and caused 10 percent of the Geneva unit’s customers to flee, provided an opportunity for Sturdza, a Romanian national educated in Switzerland, who took a 30 percent stake in the Swiss unit and bought out ING in 2005.
It was “the luck of my life,” said Sturdza, who was previously denied stock in Barings. He continues to market the heritage of the bank and hangs oil paintings of the family by British artist Ambrose McEvoy on the firm’s walls.
A former top 10 Swiss tennis player, Sturdza used his sporting connections to build a book of clients from Europe, Asia, the Middle East and Latin America, including athletes, actors and restaurant owners. Swiss banks are forbidden by law from identifying clients.
The acquisition of Geneva-based Coges adds 300 clients, more than half of which are European, according to Coges Chief Executive Officer Philippe Calame. The firm, which was founded in 1984 by Calame’s family and has 10 employees, oversees between 150,000 Swiss francs ($166,000) and 150 million francs for each client, he said, without disclosing the total assets under management at Coges.
“This is the best opportunity in a very difficult environment where we can take out all the other guys who will not be able to survive and don’t have the will to continue,” Calame said.
Fees at Swiss banks declined since the financial crisis while assets under management slumped 20 percent from 2007 to 2011, according to the PwC report, based on a survey of 100 banks. The average net margin, or net income as a proportion of client assets, plunged to 7 basis points in 2011 from 35 basis points four years earlier, PwC said. A basis point is one hundredth of a percentage point.