GENEVA (Reuters) - Consolidation may have taken off in European banking but will likely leave the specialized world of wealth management -- exclusive banking for the rich -- standing still, bankers and industry experts say.
High prices and poor-quality assets have kept buyers on the sidelines and bankers now predict, in sharp contrast to previous years, that wealth management may prove immune to the pressures that have driven consolidation elsewhere in financial services.
Even Citigroup (C.N: Quote, Profile, Research, Stock Buzz), whose private bank ranks number two worldwide by assets, has abandoned its bullish takeover rhetoric and will focus now on organic expansion, according to Samir Raslan, head of private banking in various key emerging markets.
"We will always be open for any opportunities but we will continue to focus on organic growth and building our business in a very serious and controlled environment," Raslan said at the Reuters Wealth Management Summit.
Prices for wealth management assets are at a five- to six-year cyclical peak, experts say, the ideal time to sell from the seller's point of view but a bit off-putting for buyers.
Once you add the peculiarities of the rich -- some bankers refuse to abandon ship, even if their client base is shrinking -- and concerns about transparency, then the overall picture of consolidation in wealth management looks fairly bleak.
Only two years ago, experts thought consolidation would sweep the hundreds of privately owned specialist banks that dot Switzerland's mountainsides and the back streets of London's City financial district, as regulatory costs rose and global scale became more important.
DIDN'T BARK
"Past predictions that there would be a large volume of consolidation -- which has not happened, especially in the offshore market -- were based on rational thinking and now consolidation is not taking place based on irrational thinking," said specialist mergers advisor Ray Soudah.
Even banks that would like to expand internationally, such as France's Societe Generale SOGN.VX, are left few affordable opportunities.
"It's tough to have good acquisitions because prices are very high," said Nicolas Cagi Nicolau, a leading private banker and head of structured products at Societe Generale.
Structural peculiarities to wealth managers -- whose fortunes often turn on a few, lavishly paid relationship managers with contacts in moneyed circles -- may also play a role, said Sebastian Dovey, head of specialist consultancy to the wealth management industry, Scorpio Partnership.
Frequently, the most talented bankers and relationship managers simply walk out the door when one wealth manager acquires another, making buyers increasingly shy, he said.
"It's really easy to set up your own shop. You could do it tomorrow in Switzerland, in the UK and in other countries like Singapore," he said.
Small players in the atomized sector, which includes hundreds just in Switzerland, the world's largest center for cross-border investments, often face their own peculiarities that take the shine off. Continued...
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