Commerzbank Said to Seek Custody Business Sale
Commerzbank AG (CBK), Germany’s second- biggest lender, is exploring the sale of its custodian business as Chief Executive Officer Martin Blessing reviews company strategy, according to people familiar with the matter.
The Frankfurt-based lender is working with UBS AG (UBSN) to help find buyers, said the people, who asked not to be identified because talks are private. The business is likely to attract strategic players already in that sector, said the people. The business may fetch more than 200 million euros ($261 million), they said.
Commerzbank, which may sell the business by the end of the first quarter, could also decide against a sale if the bids are deemed too low, said one of the people.
Commerzbank has said that it will review its business areas amid Europe’s debt crisis. Custody banks have been affected by competing forces as gains in stock prices boost fees for overseeing and managing client money, while low interest rates force them to waive fees on money funds, erode yields on portfolios and reduce returns on securities lending.
At the end of June there were 48 active custodian banks in Germany with total funds amounting to 1.2 trillion euros, according to the German Funds Association BVI. Commerzbank’s custodian unit had 24.4 billion euros in mutual funds, 46.1 billion euros in special funds and 20.7 billion euros in real estate funds under management, BVI said at the end of June.
Bank of New York Mellon Corp., State Street (STT) and JPMorgan Chase & Co. (JPM) are the world’s largest custody banks. Custody banks keep records, track performance and execute trades for institutional investors including mutual funds, pension funds and hedge funds. They can also handle foreign exchange transactions and lend cash and securities.
Officials at Commerzbank and UBS declined to comment.
Last month, Blessing forecast a “more challenging” second half of the year as lower client activity and regulatory costs weigh on earnings. He is scheduled to present a business review on Nov. 8 as well as discuss plans for the consumer-banking unit and the bank’s strategy for the portfolios it’s winding down, including public finance, commercial real estate and ship finance.
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