Generali Completes Cash, Stock Deal To Sell Swiss Banking Business

Stephen Little

14 July 2014

for SFr1.5 billion ($1.68 billion). BSI has a footprint in several regions, including Asia.

Generali will receive SFr1.2 billion in cash and SFr300 million in BTG shares listed on the Sao Paulo Stock Exchange, Generali said in a statement today.

While Generali expects the deal to generate a “minor” net loss in the region of €100 million ($136.3 million) on completion, it should add nine percentage points to the group’s Solvency 1 ratio, the insurer said. The transaction is expected to be completed by the first half of 2015 and is subject to regulatory approval.

The Generali Group chief executive, Mario Greco, said that the sale of BSI was a “key milestone” in the turnaround of Generali and would help to restore the capital base of Generali over a year in advance of its 2015 plan.

“This sale completes the disposal process aimed at strengthening the capital base of the group, resolving a key issue for us, and allowing Generali to focus on driving forward with its core insurance business. This result is a testament to our team’s ability and commitment to execute a complex transaction in a challenging environment. With regards to BSI, the sale will allow it to benefit from a new owner dedicated to its development as a leading private banking group,” said Greco.

The sale of BSI is part of Generali’s strategy to focus on its core insurance business and improve its capital position. On completion, Generali will reach a total of €3.7 billion in disposals of non-core assets, reducing both the debt and the leverage position of the firm.

The disposal of the bank will significantly reduce Generali’s non-insurance activities and it is expected to be a positive factor for rating agency evaluations.

Generali said that the sale of BSI may be adjusted to reflect any fine by the US Department of Justice’s tax amnesty programme relating to Swiss financial banking institutions payable by BSI.

M&A merry-go-round

The move is also a sign of continued busy M&A activity in the European wealth management arena, including Switzerland, as firms look to sell businesses that have become unprofitable, sometimes in the face of increasing pressure on Swiss bank secrecy laws and legacy issues associated with them.

BSI represents BTG Pactual’s largest acquisition outside Latin America, creating an international wealth and asset management business with more than $200 billion in assets under management.

BSI will become BTG Pactual’s global wealth management platform and will continue to operate under the BSI brand and identity.

“The acquisition of BSI reflects our confidence in the strength and tradition of Switzerland as a global financial center, the quality of BSI employees and clients, and the opportunity we see to build one of the world’s leading private banking franchises,” said chief executive André Esteves.

The acquisition is another case of a Swiss banking business being bought by a Brazil-based entity; in 2011 Safra bought Sarasin, creating the Bank J Safra Sarasin business that recently bought the Swiss wealth arm of Morgan Stanley.

Amid an environment of increasing regulatory costs and falling profits, there have been a number mergers and acquisitions in Switzerland in the past year.

Last month, HSBC Private Bank (Suisse), the Swiss subsidiary of Hong/Kong London-listed banking giant HSBC, agreed to sell a portfolio of its private banking assets in Switzerland worth $12.5 billion to Liechtenstein's LGT Bank (Switzerland), as part of its strategy to streamline its business in the US and Europe.

Other big deals in the past year have included Credit Suisse buying part of the non-US wealth management business of Morgan Stanley. Julius Baer also bought the non-US wealth arm of Bank of America Merrill Lynch, while Lloyds Banking Group has sold an international private banking arm to Union Bancaire Privee. There are more than 300 banks in Switzerland – a number that has fallen from around 375 around 2000, according to the Swiss Bankers Association.