Brazil-based BTG Pactual's move last week to buy Swiss private bank BSI from Italian insurer Generali has several important implications. Not least of these, as far as Hanspeter Brunner is concerned, is the fact that BSI will finally have clarity about its future – subject to regulatory approval of the deal.
“Generali decided to sell us two years ago, which brought the business to a grinding standstill,” BSI's Asia head told AsianInvestor yesterday. “It was very difficult to grow or attract people as a result, because our destiny was totally unclear. Existing clients also became uncertain.”
Among other benefits, he notes, are that BTG will be actively involved in developing BSI as its global wealth platform, whereas Generali was a passive shareholder. Brunner also sees the co-investment opportunities that BTG can provide through its other areas of business as attractive for BSI’s top-tier clients.
In an intriguing side tale, there were reports last week that UK bank RBS is considering selling the overseas arm of its private bank, Coutts – which Brunner ran for nine years before joining BSI, as first reported by AsianInvestor. BTG Pactual has been mentioned in the media as a potentially interested party.
Asked whether BTG is looking at the purchase, Brunner says it is not considering such a deal now, as it has other things to focus on, having just completed the BSI acquisition. In any case, speculation about Coutts’ international business being sold has been going on for 10 years or more, he adds.
Still, down the line, further BTG acquisitions are possible. There are likely to be more boutiques that decide to sell their Asian arms in the next few years, and the group would be open to looking at opportunities, though it’s not systematically looking for more purchases, says Brunner.
As to which other firms had considered buying BSI, he said: “There were two, three, four seriously interested parties”, but no transaction led to exclusive negotiations. Interest was particularly strong in the Asian part of the business, he notes, to the extent that firms wanted to know if it could be sold separately. But that’s not a model that Generali would consider, says Brunner.
Asked whether Singapore will remain BSI's effective headquarters in Asia, he noted there are around 240 staff in the city-state and around 80 in Hong Kong. “Maybe that balance will change; it depends how the business grows.”
BSI also plans to review its strategy for China, India and Asia more broadly, says Brunner, “because we can now look ahead with more certainty”.
He expects it to be a lot easier to hire and retain staff now; in fact, the firm has already started talking to potential additions. “We were approached by a number of people after the [BTG deal] announcement."
There’s no specific plan in terms of headcount target, adds Brunner; the aim is simply to add as many good hires as can be found and integrated into the organisation. “I don’t think you’ll hear a lot of moves in the next two, three, four months, but we are back in the job market – albeit a very competitive market.”
But Brunner is comfortable that the firm is a very different animal from what it was before with a stronger, more differentiated offering.
And BSI didn’t suffer as much as it might have done since it was put up for sale, he says. It only lost a small Southeast Asia team last year, he says, without giving a headcount. In fact, the firm has been able to largely retain clients and attract new ones.
“It could have been much much worse,” he says. “I don’t want to think about how bad it could have been had the uncertainty gone on another six or 12 months.”
Still, Brunner acknowledges that cost and regulatory pressures have gone up significantly and will continue to do so. As a result, he sees the smaller players struggling. “To be quite frank, if you are below $10 billion in AUM, it’s becoming very difficult to make money – both clients and banks are competitive, and costs are high.”
That won't be an issue in BSI's case. The deal will add $100 billion of the Swiss firm's assets under management to BTG's $83 billion asset management business and $30 billion private banking business.
And there are a number of natural links between the banks. One is that BSI and BTG Pactual have very similar types of clients, says Roberto Isolani, London-based head of international client coverage at BTG: they tend to be first-generation money entrepreneurs, who need support developing their businesses and wealth.
How separate will BTG and BSI remain? Says Isolani: “Culturally we'd like to bring the integration as far as we can; to have people travelling between Latin America and Asia to get to know each other. But in terns if [structure], there won't be any more integration than there is now.”
Asked why it took so long to decide to buy BSI, Isolani points to BTG being occupied with completing two major acquisitions during 2013.
“We've been looking at taking a step like this for the past three to four years, but had not found the right asset,” he says. “Also, not being prepared to move forward last year has meant not doing anything since then. Luckily that has meant we have been able to do something bigger than we could have done back then.”
The deal is a continuation of BTG Pactual's existing activity, adds William McGrath, the bank's head of Asia. The firm has been focusing on intermediating capital flows from Asia to Latin America, since the latter generally has a shortage of capital and the former a surplus.
Moreover, it offers infrastructure funds, private equity and long-only funds focused on Latin America, and has been talking to Chinese, Japanese and Korean corporates about opportunities in South America.
Meanwhile, Brazil has the biggest Japanese population outside Japan, he adds, meaning there is a lot of familiarity between the two countries already. And BTG recently set up offices in Shanghai and Singapore for commodities trading.