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Fresh private bank M&A adds to sector shakeup

Consolidation in the private banking industry picked up pace on Thursday, creating fresh players in the Asian and British wealth management sectors and reshaping how the rich manage their money around the world. Dutch bank ING, under pressure from the European Union to divest assets after receiving government bailout funds during the financial crisis, finally sold its Asian private banking assets to a domestic player.

Elsewhere, Belgian group RHJ International made a transformational deal with bailout-hampered Commerzbank to enter British wealth management sector, while UK lender Lloyds entered talks to shift its portfolio management service.

Add to that the open ambitions of the likes of Barclays and Julius Baer to expand through major acquisitions, and the stage is set for more blockbuster combinations in the increasingly attractive sector.

The deals also pointed to improving valuations in the once-secretive industry, where prices fell from highs near 8% of assets under management (AuM) before the crisis to lows of nearly 1% of AuM at the nadir.

Though they are not expected to return to their once-lofty highs, the valuations of Thursday's deals were boosted in part because markets are turning, but also because some sellers need the cash.

 

ASIAN, BRITISH DEALS

 

After months of rumors, ING sold its Asian private banking business to Singapore's OCBC for about $1.5 billion, a hefty premium of about 5.8% of managed assets.

That followed the October 7 sale of its Swiss operations for more than $500 million to Julius Baer, a deal done at a much more modest 2.3% of assets under management, excluding surplus capital.

Though it was a smaller deal, RHJ's purchase of Kleinwort Benson attracted notice for its implications and lifted RHJ's shares 8.5%.

RHJ, which failed last month in its bid to buy GM's European car unit Opel, plans to use the brand name for all of its financial services going forward. It is the firm's first major deal since 2006 and part of its stated push into European financials.

KBC Securities characterized it as the deal the market had been waiting for from RHJ. It was done at what was seen as a reasonable 4.2% of assets under management.

Also on Thursday, Lloyds said it could sell its Bank of Scotland portfolio management service, which creates portfolios for clients with more than 100,000 pounds, to Rathbone Brothers as part of a drive to reduce its reliance on state support and escape EU sanctions. (Reuters)