Private banking: Suitors for Coutts

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Coutts International has plenty of attractive assets to offer its many possible new owners. Julius Baer looks the best fit.

Royal Bank of Scotland has finally put Coutts International on the chopping block, and thank goodness. For one, RBS needs to start making some money – but for Coutts itself, it desperately needs to focus on rebuilding its UK brand.

Formerly regarded as a national jewel, being known as the Queen’s bank, Coutts missed out on the opportunity to make a dent in the UK wealth industry when public sentiment turned against its competitors such as Barclays and HSBC during the financial crisis.

Instead it kept its head down, trundled along, becoming somewhat lost and stuck in an age that has long passed. Even its offices on The Strand have not been touched in years, although investing in a bank for the rich while its taxpayer-owned owner RBS faltered was never going to be an easy task.

Flogging the international business therefore will allow senior management to turn its attention to the fragmented and opportunity-laden UK market. But who will buy Coutts’s international business? Especially given most private banks are retreating from the enormous and scattered geographical footprints they once had.

Reportedly some dozen banks have signed up to look at the sale which is estimated to fetch $600 million-$900 million for the $33 billion in assets under management it has.

Among those mooted to be interested are Singapore based DBS and UOB, Swiss banks Credit Suisse, Vontobel, Julius Baer, Safra Sarasin, and Syz and Co, along with BNP Paribas, Canada’s BMO, MayBank and HSBC. With such varied prospective buyers it could be that RBS is considering slicing up Coutts’ International.

The international business operates in seven countries and offshore centres – with regions divided among heads of Eastern and Central Europe, Switzerland (onshore and offshore) and Asia. It is hard to see which of those prospective buyers named would benefit from that footprint. If anything, it would feel like more of a fit for a US firm like Wells Fargo which wants to expand globally.

It is hard to imagine DBS wanting to take on another acquisition so soon after acquiring SG’s Asia business, but as it has its sights on becoming the leading pan-Asia bank, Coutts’ regional assets may appeal.

UOB seems a long way from taking on the high net and ultra high net worth market in any seriousness but Coutts’ may give it the lift it needs. For MayBank the Asia assets would allow the bank to at least begin to step up to rival DBS. BNP Paribas would possibly work with the Asian assets but it’s hard to see how the Swiss or Eastern European assets would fit. Those would be best suited for the potential medium-sized Swiss buyers like Vontobel.

Perhaps the only suitor for the entire business would be Julius Baer which, with Merrill Lynch’s Asia wealth business firmly under its belt, could now begin to make itself a bigger global competitor.

Would Boris Collardi, CEO, want to rock the boat though, particularly when the business is doing so well? If he does, then Credit Suisse, which appears to be in disarray, had better watch out.