* Credit Suisse buying $13 bln in assets
* Deal lauded by analysts
* Comes as bank slashes 1 bln Sfr in unit spending
By Katharina Bart
ZURICH, March 27 Credit Suisse is
buying Morgan Stanley's wealth management arm in Europe,
the Middle East and Africa, acquiring $13 billion in assets in a
move to offset exposure to more volatile investment banking.
The assets are tiny by the standards of Credit Suisse's
private banking operation, the world's fifth-largest with nearly
800 billion Swiss francs ($843 billion) under management.
"Credit Suisse sees more daily fluctuation of their assets
under management due to market movements and foreign currency
swings than this deal size," said Zuercher Kantonalbank analyst
Andreas Venditti, who has a "market weight" rating on the stock.
But the deal underscores Credit Suisse's efforts to beef up
private banking, which tends to deliver a smoother revenue
stream than investment banking.
For its part, Morgan Stanley is placing its wealth
management focus on the United States, where Chief Executive
James Gorman is hoping for more stable returns to compensate for
the uncertain rewards from trading and investment banking.
Details of the deal - one of Credit Suisse's first notable
acquisitions since it bought out the remainder of Brazilian
investment fund Hedging-Griffo in 2011 - were not disclosed. It
said it expected to complete the purchase later this year.
Hometown rival UBS has also focused on private
banking, but began reducing its exposure to fixed-income
investment banking dramatically last October.
Credit Suisse is also trying to slash costs at the private
banking operation by 1 billion francs by 2015 and has already
folded the smaller asset management arm into that unit.
In 2011, Credit Suisse said it would integrate Clariden Leu,
a private bank it owned but allowed to operate independently.
Credit Suisse says the integration has been a success, but
some clients have withdrawn funds.
A CAUTIOUS ACQUIRER
Credit Suisse said last month that net new assets from
wealth management clients - a key indicator of future revenue -
tumbled 28 percent to 2.9 billion francs in the fourth quarter.
Like UBS, it suffered big outflows of money from
clients in Europe, where Swiss banks are under fire for helping
wealthy foreigners avoid paying tax.
Credit Suisse's private bank is also grappling with a U.S.
investigation into offshore accounts at the bank, for which it
set aside 295 million francs in provisions in 2011.
Switzerland is trying to get the U.S. investigation dropped
in exchange for the payment of fines and the transfer of names
of U.S. clients.
Under Chief Executive Brady Dougan, Credit Suisse has been a
cautious acquirer, save for Hedging Griffo. Most recent
dealmaking has centred around divestments, including the January
sale of its exchange-traded fund (ETF) business to BlackRock
as part of a capital-raising plan.
Morgan Stanley spokesman James Wiggins said the bank is
changing its international wealth operations to boost profits.
High net-worth clients in Asia and Latin America will be
covered from its Swiss bank, he said.
In January, the U.S. bank's wealth management division
reported a 17-percent pretax profit margin, beating an internal
target months ahead of schedule. [ID: nL1E9CI865]