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FT.com: Sarasin/Vontobel - Short-Term Tie-up Unlikely Despite Synergies

Financial Times, 10 April 2007

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Sarasin, the listed Swiss private bank, is unlikely to merge with its peer Vontobel in the short-term, sources argue. An industry source said the last talks between Vontobel and Sarasin were held in 2005, but failed due to Hans Vontobel’s unwillingness to sell the majority held by the Vontobel family.

Asked about the timing and why Sarasin’s chief executive officer Joachim H. Straehle referred to talks with Vontobel when talking to newspapers last week, an industry source explained that Sarasin’s CEO was forced to talk about ambitious expansion plans, since he has to outline perspectives for his employees in order to keep them in the company and not to lose them to other private banks poaching personnel.

Nevertheless, sources pointed at the necessity of further growth steps for both mid-sized banks, and described Rabobank’s absolute ownership of Sarasin as a matter of time. An analyst mentioned Switzerland based private bank Clariden Leu, listed UK banking group HSBC and German private bank group Sal. Oppenheim as potential suitors for Sarasin. A Sarasin spokesperson said that bank had a solid owner in Rabobank. He said Sarasin would not be an object of speculation, but would pursue an ambitious growth strategy backed by a reliable partner. A tie-up with Vontobel is not on the agenda, he stated. A Vontobel spokesperson said the independent bank would seek profitable growth in its two core businesses, private banking and investment banking.

A market source said he could no longer see the direct logic behind a tie-up between Sarasin and Vontobel. He described Vontobel as being a universal bank, while Sarasin would clearly remain focused on private banking. He did not believe that the two banks would give up their respective core strategies. Furthermore, he assumed that Sarasin’s management would have contracts with Rabobank that allowed them to complete several expansion steps before a sale was considered. Not expecting any quick moves, the source concluded that both Sarasin and Vontobel were exploring all options nevertheless.

The industry source said that adjustments in Sarasin’s and Vontobel’s strategies would be indispensable should they envisage a merger. However, this source emphasised that through a tie-up, Vontobel could strengthen its weak position in the private banking sector, while both banks would clearly benefit from back office synergies. Either you need to offer absolute niche products or achieve a certain size, the source concluded.

Referring to Rabobank’s triple A-rating, the analyst believed that Rabobank would pursue an active growth strategy for Sarasin. For a relatively small player such as Sarasin, size was the only strategy to cope with the growing number of regulatory concerns and increasing fixed costs, the analyst reasoned.

The analyst said Vontobel and Sarasin would be complementary with their respective business segments, but also geographically. While Sarasin targets the Middle East and the Asian market, Vontobel would focus its expansion on Eastern Europe. Sarasin’s ”low-end” private banking would have synergies with Vontobel’s strong position in structured products, predominately with its expertise in capital protection products, the analyst said.

Regarding the talks between the two banks, the analyst thought they could only have failed due to price issues. She said that she would be surprised by quick changes in the Swiss banking market, but believed further consolidation only to be a matter of time.

The market source indeed believed that Rabobank, Sarasin’s majority owner, would be open to talks about a sale of the Swiss private bank if a nice premium could be fetched. However, at this stage, he doubted that somebody would be willing to match Rabobank’s expectations regarding Sarasin’s price.

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