EFG focuses on private banking

MERGER

The Zurich-based institute sells to BancaStato a portfolio of 1.2 billion francs of retail and commercial accounts that it had acquired from BSI - The agreement provides for the transfer of seven employees - The top management of the two banks: ‘This is a winning agreement for everyone’

EFG focuses on private banking
CdT Archive

EFG focuses on private banking

CdT Archive

The integration of BSI by EFG bank after the acquisition in 2016 was completed last year. Among the various assets, the retail customer sector in Ticino was also absorbed. Now the Zurich bank has decided to sell that segment to BancaStato to focus solely on its main business, private banking. The agreement was reached on Tuesday night after six months of negotiations, the leaders of the two banks said yesterday in Bellinzona.

EFG International, which manages assets worth around 150 billion francs (as of the end of June), thus disposes of a 1.2 billion portfolio of around 7,000 clients, of which 80% domiciled in Switzerland and 20% almost exclusively in Italy. 660 million relate to «retail» assets - (therefore less than half a million francs) and equivalent to around 60% of the growth in 2019 of new customer assets for BancaStato. The remaining 580 million are loans, mostly mortgage, and represent more than what the Ticino bank has disbursed in 2019. The transaction will be completed by March 2021.

A ‘win-win’ deal

Both top management expressed great satisfaction with the agreement, the financial details of which were not disclosed. BancaStato will in any case finance the operation with its own funds.

We are proud of this cooperation which allows us to offer banking continuity to customers who will pass by and to whom we warmly welcome - explained Fabrizio Cieslakiewicz, chairman of the BancaStato management -. The Ticino financial centre has been faced with many challenges in recent years and I am convinced that in the future we will only be successful by collaborating. Certainly the acquisition also allows us to significantly increase our commercial volumes: regardless of the coronavirus developments, we will soon be able to see the benefits of this, also to the advantage of the Property, that is, of all Ticino savers.

There was an excellent understanding between the parties - commented the CEO of EFG International Giorgio Pradelli -. The agreement now allows us to focus on our core competencies and to strengthen our leadership in Ticino in private banking. At the same time, the agreement with BancaStato guarantees our retail and commercial customers to be served by a bank specialised in the retail segment. It is a winning agreement for everyone that has been positively received today . A reasoning evidently shared also by the market: yesterday the shares of the Zurich bank, which had been under pressure for some time, closed with + 1.18% at 5.13 francs.

7,000 customers and 7 employees

The months of negotiations included a detailed analysis of the portfolio of 7,000 clients that will be transferred (judged “perfectly compliant”), and an agreement to avoid layoffs. As for the affected customers - which also include EFG employee salary accounts - nothing will change in terms of pricing or performance.

On the other hand, as regards the workforce, seven EFG collaborators follow the activities and will move to BancaStato under the same conditions by the first quarter of 2021. In addition to the seven collaborators who will pass through its ranks, BancaStato does not think that it will be necessary to further strengthen his team: «We acquire volumes comparable to a year of growth, we have the workforce ready, explained Cieslakiewicz.

As part of this agreement there will be no layoffs, underlined the head of Switzerland and Italy of EFG Franco Polloni, underlining, however, that nothing will change at the branch level for the Ticino offices. To strengthen the square it is necessary both to collaborate and to focus on mutual strengths - he added -. Among other things, with the transaction we lay the foundations for future collaborations between the two banks, for example in investment funds and basic banking services. We have plans and will soon set up a joint strategic committee to consolidate the future commercial partnership.

Looking forward

The business model for the retail sector has become expensive in recent years, especially with negative rates putting margins under pressure. On the other hand, it has always been considered a hard core for banking business. It is true - Cieslakiewicz explained to us - but we are a universal bank and for us, accompanying customers from the very first steps is also an investment with a view to growth over a lifetime.

The EFG, on the other hand, in addition to focusing on its core activities, is also ready to look around to seize new opportunities for strategic growth. We are satisfied with this year’s results, in the first six months the inflows of funds have grown by 5% - explained Pradelli -. At the same time, both in Ticino and in Switzerland the private banking sector is consolidating. It is a question of critical masses and we are open to new opportunities.

The English language of the sector in simple words

Includes all banking transactions with a large customer base, including basic services and standard products, such as account maintenance, payment transactions, credit card distribution, offering simple investment products and transactions mortgage and credit. Retail banking is aimed at people with net worth not exceeding a maximum ceiling. Depending on the bank, this can range from 250,000 to one million francs in Switzerland. Retail banking is managed through various channels, for example through branches, the ATM network, e-banking and the telephone.

Private banking

Private banking is the banking activity aimed at customers with significant assets and who therefore need non-standardized financial services or products. These include the management of securities and real estate and investment advice; tax, trust and succession consultancy services, but also intermediation in works of art and philanthropy activities.

Wealth management

It indicates the management of high value assets and is therefore an extension of private banking. Banks generally divide wealthy customers into three categories, which correspond to more sophisticated levels of services: Affluent customers, ranging from one million to ten million francs in assets. The «High Net Worth Individuals. (HNWIs), from ten to 25/30 million. And finally the «Ultra High Net Worth Individuals» (UHNWIs), from 25/30 million upwards.

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