Swiss private banking mergers are creating sales opportunities for Temenos Group AG, according to David Arnott, chief executive officer of the Geneva-based financial-services software provider.
“Generally consolidation in banking is a good thing for us,” Arnott said in a telephone interview yesterday after the company reported full-year profit more than doubled to $68.2 million. “There’s a pipeline of deals in Switzerland.”
Temenos rose as much as 8.8 percent, the most in almost 10 months, and was up 6.7 percent to 28.60 Swiss francs at 12:59 p.m. in Zurich today, valuing the company at more than 2 billion francs ($2.3 billion). The company reported 14 percent growth in software licensing in the fourth quarter and proposed to boost its shareholder dividend 25 percent to 35 centimes, according a statement e-mailed yesterday after the market closed.
Temenos, which has clients in 130 countries including BNP Paribas SA and Schroders Plc, expects mergers among Swiss banks to provide opportunities for firms to renew their information technology systems. While Arnott declined to comment on specific contracts being negotiated this year, Temenos said it added 14 clients in the fourth quarter as license sales rose in Europe and the Asia-Pacific region.
Julius Baer Group Ltd., Switzerland’s third-largest wealth manager that oversees 254 billion francs for clients, has said it may invest several hundred million francs in a global information technology platform, after acquiring non-U.S. Merrill Lynch wealth units from Bank of America Corp.
Other foreign-owned firms are looking to follow BofA, Dutch lender ABN Amro Bank NV and the U.K.’s Lloyds Banking Group Plc in leaving the Swiss private banking market. HSBC Holdings Plc plans to sell parts of its Swiss private bank, people familiar with the matter said last month, while Standard Chartered Plc said on Feb. 12 it’s seeking buyers for its Geneva-based unit.
Swiss private banks, which store deposits and provide investment advice for wealthy families, spend as much as 25 percent to 40 percent of costs on outdated information technology systems, some of which were designed in the 1960s and 1970s, Arnott said. Those expenses are crimping profitability as lucrative cross-border business is leaving the country, he said.
“It’s no longer sustainable because the market has shrunk and the money has moved away from Switzerland.”
The world’s biggest cross-border haven, with $2.2 trillion overseen for non-residents, is under pressure from a crackdown on tax evasion by the U.S. and European countries eager to recoup undeclared money stashed offshore. UBS AG and Credit Suisse Group AG, the nation’s two largest wealth managers, have both estimated withdrawals from customers in western Europe of about 30 billion francs.
Temenos is also telling financial companies in Geneva, where banks date to the 18th century, to adapt their wealth-management services to younger customers who want to use smartphones and tablets to communicate with advisers and devise their own investment portfolios.
“They want to have meaningful discussions,” Arnott said. “You simply can’t do that if you’re running an old-fashioned Swiss private banking system in a dark wooden office with a relationship manager who sends you a PDF document once a month. At the same time as the total assets are shrinking, you’ve got to deal with the generational shift.”