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By Saeed Azhar and Katharina Bart
SINGAPORE/ZURICH Aug 22 Royal Bank of Scotland
plc might split its international private bank into
separate European and Asian divisions to attract Asian buyers
who have the financial muscle for a deal but are reluctant to
take on European client risk.
RBS confirmed earlier this month that it was considering a
sale of Coutts International, in a deal that could fetch as much
as $1 billion and allow the British bank to focus on domestic
lending. That news was greeted with enthusiasm by potential
suitors, ranging from Singaporean and Japanese banks, to niche
private players in Europe.
But to increase the competitive tension and secure a better
price, RBS could break up the business, people familiar with the
sale process said.
"RBS will start the process saying they are selling it as a
whole. They will provide enough information about the
constituent parts such that if someone is interested in parts
they can bid," said a person briefed on the sale.
"If they find that there's going to be a whole bunch of
people looking at Asia and a whole lot looking at Switzerland,
they will consider splitting it."
RBS declined to comment on the sale process. The bank's
global ambitions brought it to the brink of collapse in 2008 and
it is under pressure from the government to focus on loans to UK
households and businesses following a taxpayer bailout. It is
majority owned by the state.
Of the $36 billion that RBS Coutts International manages,
around third comes from Asia, according to the person briefed on
If sold separately, the Asian part could attract bids from
DBS Group Holdings and United Overseas Bank,
Singapore's no. 1 and no. 3 lenders as well as Chinese or
Japanese players, sources said.
A sale for the entire overseas business would likely scare
off Asian buyers because European clients are more likely to be
targeted in tax evasion probes and are viewed as too risky to
take on, they said. Asian banks have been the most aggressive
purchasers of private banking assets since the financial crisis.
Other potential suitors include Credit Suisse,
Standard Chartered and BNP Paribas. UBS
and HSBC, which have participated in previous
auctions, are less keen this time around, sources said.
The banks declined to comment.
Morgan Stanley, which has advised RBS on past
transactions, is the front runner to win the Coutts
International sale mandate, the people added. Morgan Stanley
declined to comment.
A source close to RBS said the seller would consider the
bids for the whole before looking at offers for parts of it in a
"potential second phase."
Switzerland's smaller private banks are also expected to be
interested in Coutts International, which runs its operations
from Zurich. Its British arm, based in London, includes Queen
Elizabeth among its customers.
Swiss private banks are on the hunt for acquisitions to
shore up their profits after crackdowns on tax evasion by U.S.
and European governments prompted clients from those regions to
withdraw money from Switzerland.
Banks such as privately-held Syz & Co are among those to say
they are on the lookout for potential purchases. Syz, which has
up to 200 million Swiss francs ($220 million) for deals, told
Reuters it would be interested in looking at Coutts
International "depending on the design of the sale".
Julius Baer has been an active acquirer, picking up Bank of
America Corp's overseas wealth arm for 860 million
francs two years ago and, last month, the private banking
activities of Israel's Bank Leumi in Luxembourg and
Switzerland for up to 70 million francs.
A spokesman for Julius Baer declined to comment.
Julius Baer bought the entire international wealth arm of
Bank of America and people said there would be an appetite among
some buyers to acquire Coutts International as one business.
Canada's Royal Bank of Canada, which bought Coutts
Latin America and African businesses, is one such buyer, the
people added. RBC declined to comment.
"Ultimately the question is -- who are the buyers, what are
they interested in and how would they prefer the sale to be
structured?," said Sam Kok Weng, financial services M&A Partner,
PricewaterhouseCoopers (PwC) Singapore,
"That will drive the transaction itself. It is very possible
in the M&A world to fit the buyer's need."
Asia has seen an increase in major private banking M&A
following the financial crisis and lenders from Singapore, the
region's private banking hub, have been prominent buyers.
Oversea-Chinese Banking Corp tripled its assets
after buying ING's Asian private bank in 2009 for $1.5 billion.
An OCBC spokeswoman said the bank was not going to bid for
Singapore's United Overseas Bank has so far avoided
acquiring private banking businesses but a spokeswoman, while
declining to comment on Coutts International, said the bank was
open to possible deals.
This year, DBS bought the Asian private banking arm of
France's no. 2 bank Societe General, which is expected
to be integrated into its private bank by the fourth quarter.
"The ink is only just dried on the SocGen acquisition and it
will be challenging for them to bid something this big. But they
will have a look," a financial industry source said.
DBS declined to comment on the Coutts International sale but
said the bank kept an eye out for opportunities.
"We are primarily focused on organic growth. However, if
there is an opportunity that meets our investment criteria ...
and passes our financial criteria, we will consider it
carefully," a spokeswoman said.
(Additional reporting by Matt Scuffham in London, Maya
Nikolaeva in Paris and Anthony Deutsch in Amsterdam; editing by
Denny Thomas and Carmel Crimmins)