Mergers & Acquisitions

Liechtenstein’s LGT buys ABN Amro’s Asian private banking operations

Deal means LGT doubles Asian assets under management to US$40 billion

PUBLISHED : Tuesday, 06 December, 2016, 5:40pm
UPDATED : Wednesday, 07 December, 2016, 3:36pm

LGT, the Liechtenstein private bank, has bought ABN Amro’s private banking business in Asia and the Middle East for an undisclosed sum, the latest development in Asia’s volatile private banking space.

Owned by the Princely House of Liechtenstein, LGT expects to see its assets under management (AUM) in Asia rise to over US$40 billion as a result of the transaction, and US$160 billion overall.

In 2015, LGT had AUM in Asia of US$25 billion, and ABN Amro US$ 19 billion, according to figures from Asian Private Banker.

“This acquisition will allow us to further extend our market position and to achieve further profitable growth,” said Prince Max von und zu Liechtenstein, LGT’s chief executive.

The private banking and wealth management sector in Asia is currently in a state of flux.

In October, Australian bank ANZ announced the sale of its retail banking and wealth management units in five Asian markets to DBS, while earlier this year, Swiss private bank Union Bancaire Privee acquired Coutts International from Royal Bank of Scotland in March last year, particularly hoping to leverage its Asian operations.

Julius Baer, and DBS had both considered acquiring ABN Amro’s private banking business in Asia, Bloomberg reported in October.

Too many banks are chasing a pool of Hong Kong and Singapore-booked AUM that is not large enough, nor growing fast enough, for them all to build up to a reasonable scale
Toby Pittaway, partner, Oliver Wyman

Julius Baer, as well as other banks, including Credit Suisse, BNP Paribas are also looking to grow by hiring more wealth managers, with the goal of targeting Asia’s newly emerging rich.

The competition is proving fierce however, particularly for those assets that have made it out of China already.

“Too many banks are chasing a pool of Hong Kong and Singapore-booked AUM that is not large enough, nor growing fast enough, for them all to build up to a reasonable scale,” said Toby Pittaway, partner at consulting firm Oliver Wyman.

Nonetheless, scale is essential for private banks in Asia to make operating in the region sustainable, both in terms of the costs and capital required.

In 2015, UBS Wealth Management had US$274 billion assets under management in Asia.

This quest for scale is contributing to the volatility in the private banking sector.

“Consolidators, often looking to get themselves into the leading pack, are willing to pay relatively attractive prices for what are typically unprofitable books of business from the seller’s perspective,” said Pittaway.

Other banks have decided that the best strategy is to leave the market.

Jeroen Rijpkema, chief executive of ABN Amro Private Banking International said in a statement that

after a strategic review, the bank had decided to focus on further strengthening and growing its private banking activities in Northwest Europe.

“The transfer of our private banking business in Asia and the Middle East is the logical next step in implementing this strategy,” Rijpkema said.

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