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Falcon Private Bank Goes Shopping Again In New M&A Deal

Tom Burroughes

27 June 2013

Falcon Private Bank, the Swiss-based firm, has agreed to buy the Central and Eastern Europe private banking business of Hyposwiss Private Bank Zurich, continuing a run of merger and acquisition activity among the Alpine state’s banks.

The business to be acquired is a wholly-owned subsidiary of St Galler Kantonalbank. Terms of the transaction were not disclosed. Subject to regulatory approvals, the closing is expected in the third quarter of 2013.

"It is our strategic ambition to become a leading Swiss private banking boutique focusing on emerging markets and this acquisition brings us one decisive step forward. The acquisition of the Central and Eastern Europe business of Hyposwiss Private Bank is a perfect strategic match in terms of business model, client segment and key markets, and we look forward to broadening our global footprint in Eastern Europe and sharpening our emerging market focus together with our new colleagues," Eduardo Leemann, chief executive at Falcon Private Bank, said in a statement today.

Roland Ledergerber, CEO of St Galler Kantonalbank and chairman of the board of directors of  Hyposwiss Private Bank Zurich, added: "We are proud to have found a strong and dynamic group such as Falcon Private Bank to ensure continuity, stability and security for our valued clients and for our dedicated team of professionals. We are extremely confident that Falcon Private Bank is the best match to continue building on our team's successful private banking business in Central and Eastern Europe."

While SGK is focusing its business operations in its home and selected markets, the move highlights how Falcon, which is owned by the government of Abu Dhabi, has expanded through a mix of organic growth and some select M&A deals. Last year, Falcon bought Clariden Leu (Europe) from Credit Suisse, a move that saw the Clariden Leu brand consigned to the history books. That move boosted Falcon’s assets under management to almost SFr15 billion (around $16.0 billion) from SFr12.5 billion at the time.

The deal comes against a background of Swiss banks, facing mounting regulatory and international pressures, having to re-shape their strategy, either by expanding their onshore market presence, achieving more critical mass in key markets via expansion, or spinning off underperforming units. Credit Suisse, for example, recently agreed to buy some of the non-domestic wealth business of Morgan Stanley; Julius Baer has been transferring the non-US businesses it bought over a year ago from Bank of America Merrill Lynch. EFG International, another Swiss-headquartered firm, has been offloading non-core businesses as part of a move back into profitability.

A study last October by Scorpio Partnership, the consultancy, showed that prices paid for such businesses in M&A deals have fallen. Scorpio’s 2012 Wealth Management Deal Tracker showed the valuations benchmark is now resting at 2 per cent of assets under management compared to nearly double that in 2010. There are strong indicators this will continue downward to 1.5 per cent in the next one or two years, it said.

St Galler

"The St Galler Kantonalbank, SGKB, strengthens its core business and will focus on the domestic
market in Eastern Switzerland and the markets in the rest of Switzerland and Germany," the bank said in its own statement today.

"In this context, SGKB divests from Hyposwiss Private Bank Geneva SA and the Eastern European and
Latin American business of Hyposwiss Private Bank AG Zurich. The remaining business of Hyposwiss Private Bank Zurich - mainly business in Switzerland and Germany - will be integrated into the SGKB Private Banking and repositioned within the group in the present location in Zurich," it continued.

"SGKB reacts with these strategic adjustments to the changing conditions in the wealth management
business and sets the basis for sustained growth in its core markets. The location in Munich will be
maintained unchanged," it added.