BTG's Swiss Private Bank Assets Shrink 16% Amid Esteves Turmoil

  • BSI had client outflows of 9.3 billion Swiss francs last year
  • Company exited Malaysia in context of 1MDB affair, CEO says

Client outflows at BSI, the Swiss private bank that EFG International AG is buying from Grupo BTG Pactual, accelerated in the second half of 2015, contributing to a decline in assets under management.

Outflows totalled 9.3 billion francs ($9.7 billion) in 2015, including business exits, according to a presentation by EFG and BSI on Thursday. Assets under management dropped 16 percent to 77.2 billion francs at the end of December. BSI, based in Lugano, previously reported an outflow of 2.8 billion francs for the first half.

EFG, a Zurich-based company controlled by billionaire Spiro Latsis and his family, announced an agreement to acquire BSI for 1.33 billion francs in February. Sao Paulo-based BTG Pactual is selling assets in the wake of a corruption investigation that led to the arrest of former chairman Andre Esteves on Nov. 25. The billionaire, who has denied wrongdoing, was released from prison in December and has since been under house arrest.

Investigations of a Malaysian government fund have prompted inquiries at Swiss banks including BSI, resulting in staff departures and the freezing of accounts at the firm’s Singapore unit. BSI’s exit from its Malaysia business occurred in the “context” of probes into 1Malaysia Development Bhd, BSI Chief Executive Officer Stefano Coduri said on a call. He declined to comment on the probe.

Legal Protections

EFG Chief Financial Officer Giorgio Pradelli said the agreement with BTG Pactual contains “strong” legal protections and a “material” escrow account for potential legal risks. The company has declined to disclose the amount held in escrow.

EFG will absorb four fifths of the 253 million franc cost of implementing the transaction, while BTG Pactual will pay the rest, according to the presentation. The deal is expected to be completed by the end of the year.

The Swiss company reiterated that it expects to generate 185 million francs of savings from the overlapping businesses and said it will shift the BSI business onto its existing information-technology platform.

EFG, which reported a 7 percent decline in profit last year, said it expects the BSI deal, excluding restructuring costs, to start boosting earnings by 2018.

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