Credit Suisse and RBC in line for BofA wealth units

by Tom Carlson | Wednesday, May 16, 2012 | 436 views

Credit Suisse and Royal Bank of Canada will be among the ones, who will be putting their initial bids as suitors for the non- U.S based wealth management business of BofA. The deal is supposed to be somewhere around $2 billion.

Julius Baer, the Swiss bank, has also been reported to be interested in bidding for the units of the American Bank in Middle East, Europe, Asia and Latin America. However it’s not been disclosed whether or not they submitted an initial bid or not.

If the deal goes through, it wills the biggest in the industry of wealth management. The last major deal was when the ING Group’s private banking assets were sold to Julius Baer and Singapore Overseas Chinese Bank in 2010 for a total sum of $1.9 billion.

Since the non-U.S wealth division for Bank of America is very small for producing any substantial profits, it is looking to auction off the business and has been receiving non-binding bids from various suitors.

The wealth division overseas a total of $2 trillion, out of which the units for auction manage around $90 billion for the second largest bank in the U.S.

Although some estimates had put the value of the deal to be around $3 billion , it’s more likely that the units that have been put up for sale will  fetch not more than $1.5-$2 billion basing on multiples of 2 % assets under management of the client. Assets of emerging markets can fetch higher multiples though.

Ever since the crisis of 2008, consolidation has been the strategy in the wealth management industry. Since a hike in the costs and regulations pressure the banking players in selling off the units serving the rich. It has also been said that Bank of America is looking to shrink the firm, hence the sales. Multiple buyers will be very readily available for low prices.

The firm has been lagging behind its peers in the recovery from 2008 crisis, mainly because of the losses and the lawsuits around the acquisition of Countrywide Financial in 2008, the subprime mortgage lender.

First round of bidding has closed down and the bank is in process of shortlisting the suitors, who will be notified very soon. All of Credit Suisse, RBC, Julius Baer and Bank of America declined to comment on the same.

RBC, the largest bank in Canada, is looking to expand wealth operations through small and medium acquisitions. It is also going to buy overseas units of private banking business of Coutts from Royal Bank of Scotland.


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