Switzerland's second-largest bank will buy Morgan Stanley's regional wealth management business in a deal expected to be finalised by the third quarter of this year.
The acquisition made by Credit Suisse will include the US investment bank's Dubai-based unit that caters to the ultra-wealthy, the Zurich-based bank said in a statement yesterday.
Credit Suisse did not provide a breakdown for the size of Morgan Stanley's regional portfolio of high net worth individuals but it has US$13 billion (Dh47.75bn) of assets under management. The bank also did not disclose a price for the total transaction.
"Credit Suisse is already active in Dubai," said Piers Brown, a banking analyst at Macquarie Bank in London. "The name of their game is asset management, as ultra high net worth individuals are their fastest-growing segment. The Swiss bank would see this as an additional book of business that would add to their existing infrastructure." The assets being acquired in Dubai, as well as those in the United Kingdom and Italy, will help to grow the client base of Credit Suisse, which globally currently manages 798.5bn Swiss francs (Dh3.07 trillion) on behalf of private individuals. The deal excludes Morgan Stanley's wealth management business in Switzerland.
"Morgan Stanley has developed a strong foothold in wealth management over the past [few] years," said Romeo Lacher, the head of private banking for Western Europe at Credit Suisse. "Its high-quality client base and experienced employees perfectly complement our ambitions to grow our share in these areas." In a separate statement, Morgan Stanley confirmed that it was restructuring its Europe, Middle East and Africa private wealth management business. Under the plan, the company's Swiss operations will be more closely focused on the "needs of institutional wealth management clients".
The buyout is a part of a larger trend by global banks to focus on their core businesses and offload non-core units. Last year, Julius Baer Group said it planned to spend up to 860 million Swiss francs on Merril Lynch's non-US wealth management businesses from Bank of America. "There has been a series of these types of divestments," Mr Brown said. "The economics of the private client fund management industry has been difficult in the past few years. And if you're a small player, you are probably wondering whether its worthwhile to compete." Credit Suisse is in the midst of a global cost-cutting initiative expected to save about 1bn Swiss francs by 2015. Its regional unit has also relocated top jobs in its investment banking division to Doha.
"I wouldn't see the deal as conflicting with their cost reduction strategy. It has always been a stated ambition by Credit Suisse to grow their volume," Mr Brown said. "It's a relatively small deal for the bank, $13bn out of 800bn Swiss francs. That's less than 2 per cent for their book, but it's a useful add-on."
Meanwhile, Morgan Stanley has pinned its own strategy on its local US-based wealth management division, a retail brokerage joint venture with Citigroup that generates significant revenues for the US investment bank.
"Morgan Stanley Smith Barney is a mid-market brokerage business," Mr Brown said. "The ultra high net worth and high net worth don't really fit in that model, and Morgan Stanley does not have scale. It would be logical for them to exit wealth management."