Buyers circling KBC's private banking arm

LONDON/BRUSSELS Fri Jul 1, 2011 12:10pm EDT

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LONDON/BRUSSELS (Reuters) - Belgium's KBC Group (KBC.BR) is expecting around eight to 10 first-round offers for its private banking arm KBL, people familiar with the matter said, after attempts to sell the business for 1.35 billion euros ($1.9 billion) failed in March.

The bancassurer's adviser JP Morgan (JPM.N) asked for bids on Friday, but several candidates wanted a few extra days, stretching the round into next week, one of the people said.

Bidders are expected to include corporate suitors and private equity firms from across the globe, the person said, and a shortlist for the next round will be drawn up in about a week.

An earlier mooted sale of KBL European Private Bankers to Indian family-owned investment firm Hinduja Group did not gain clearance from Luxembourg financial markets regulator CSSF, KBC said in March, without giving a reason.

KBC must dispose of the business as part of a restructuring required by the European Commission.

Private banks and wealth managers are attractive to financial institutions because they provide a stable asset base that can offset more volatile businesses such as investment banking.

They also help banks meet rigorous new capital requirements being implemented in the wake of the financial crisis.

Societe Generale (SOGN.PA) has said it would be interested in expanding its private banking business, having bought the private client investment arm of Baring Asset Management earlier this year.

"It (SocGen) is clearly a potential bidder," said Exane BNP analyst Francois Boissin. "It could allow them to stabilize their earnings and be a bit less geared to investment banking."

Other people listed Swiss private bank Julius Baer (BAER.VX), Canadian lender Royal Bank of Canada (RY.TO) and private equity firms including KKR (KKR.N) as possible suitors.

RBC moved to establish itself as an international wealth manager last year, when it took over the Hong Kong assets of Fortis Bank and sealed a $1.5 billion deal to buy British fund manager BlueBay Asset Management BBAYgb.PZ.

($1 = 0.705 Euros)

(Additional reporting by Chris Vellacott; Editing by David Hulmes)

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