March 27, 2013 / 6:52 AM / 5 years ago

Credit Suisse buys Morgan Stanley's European wealth management arm

ZURICH (Reuters) - Credit Suisse CSGN.VX will buy Morgan Stanley’s (MS.N) wealth management arm in Europe, the Middle East and Africa with $13 billion in assets, as it seeks to offset its exposure to more volatile investment banking.

The logo of Swiss bank Credit Suisse is seen on a building at Paradeplatz square in Zurich, February 13, 2013. REUTERS/Michael Buholzer

The assets being acquired are tiny for Credit Suisse’s private bank, which has the world’s fifth-largest private banking operation, managing 798.5 billion Swiss francs ($841.90 billion) on behalf of wealthy clients.

“Credit Suisse sees more daily fluctuation of their assets under management due to market movements and foreign currency swings than this deal size,” said Venditti, who has a “market weight” rating on Credit Suisse stock.

But the deal underscores an effort to beef up its private banking operation, which tends to bring a smoother stream of revenue than 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 UBSN.VX has also focused on private banking, but began reducing its exposure to fixed-income investment banking dramatically last October.

While beefing up the private banking business, Credit Suisse is also trying to slash its costs by 1 billion Swiss francs by 2015. As part of that effort, the private bank swallowed the group’s smaller asset management arm in November.

In 2011, Credit Suisse said it would integrate Clariden Leu, a private bank that it had owned but allowed to operate independently.

Credit Suisse has argued that the integration was a success, but some clients have withdrawn funds.


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 UBSN.VX, 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 thousands of U.S. bank clients.

Under Chief Executive Brady Dougan, Credit Suisse has been a cautious acquirer, save for Hedging Griffo. Most recent dealmaking has centered around divestments, including the January sale of its exchange-traded fund (ETF) business to BlackRock (BLK.N) as part of a capital-raising plan.

Morgan Stanley is focusing its efforts on wealth management in the United States, where Chief Executive James Gorman is hoping for more stable returns to offset volatility from trading and investment banking.

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.

Reporting By Katharina Bart; Editing by Tom Pfeiffer

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