St. Galler Kantonalbank AG, which is majority-owned by the Swiss region of St. Gallen, said it agreed to sell parts of its Hyposwiss private bank to different buyers after reviewing its cross-border wealth business.
SGKB will sell its Hyposwiss Geneva unit to Mirelis InvestTrust SA, also based in Geneva. The regional lender will also sell two Hyposwiss businesses run from Zurich. Banque Privee Espirito Santo based in Pully, Switzerland, will absorb Latin American Hyposwiss clients while Falcon Private Bank Ltd., based in Zurich, will take in eastern European customers.
“SGKB reacts with these strategic adjustments to the changing conditions in the wealth management business,” the firm said in an e-mailed statement today. Restrained “growth prospects, lower margins and rising costs due to increased regulations require a higher volume in the different offshore markets to make a profitable business. This could only be achieved with additional investments and acquisitions.”
Switzerland, the world’s largest center for cross-border wealth, is trying to shed its image as a haven for undeclared funds amid a crackdown on tax evasion by the U.S. and European governments. The U.S. Justice Department has investigated at least 14 Swiss financial firms, including regional banks such as Basler Kantonalbank, suspected of helping Americans hide money from the Internal Revenue Service.
Wealth managers are predicting a “significant consolidation” in the industry as pressure on margins and increased regulatory and tax scrutiny prompt mergers and acquisitions, according to a survey of 200 firms published today by PricewaterhouseCoopers LLP, an accounting firm.
SGKB climbed as much as 4.4 percent and was up 3.5 percent as of 1:50 p.m. in Zurich trading today. The move trimmed the stock’s decline since this year’s March 15 high to 17 percent and gave the company a market value of 1.92 billion Swiss francs ($2 billion). SGKB said it plans to integrate the remainder of Hyposwiss private bank to focus on private banking for Swiss and German customers.
SGKB increased operating income 3 percent in the five months through May from a year earlier, and expects to report one-time items of about 7 million francs for 2013 related to the reorganization, it said today. SGKB plans to publish half-year results on Aug. 15.
“We see the strategic repositioning as positive and maintain our overweight rating,” Andreas Brun, an analyst at Zuercher Kantonalbank, said in a note to clients today. The stock may recover after investors sold shares amid concerns around Switzerland’s tax disputes with the U.S., according to Brun.
Hyposwiss, established in 1889, had 7.2 billion francs under management at the end of December, down from 9.1 billion francs two years earlier, company figures show, and reported a net outflow of almost 1 billion francs last year.
Swiss prosecutors opened an investigation in January last year after they were alerted by a law firm that was offered data stolen from Hyposwiss. A former “external” bank employee was arrested, the office of the federal public prosecutor said in February last year. The stolen data related to a dispute between Russian billionaires Oleg Deripaska and Vladimir Potanin, according to a report in Handelszeitung newspaper.
Banque Privee Espirito Santo is owned by Espirito Santo Financial Group, the parent company of Banco Espirito Santo SA, Portugal’s biggest bank by market value. Falcon Private Bank is owned by Abu Dhabi’s government-controlled Aabar Investments PJSC.