Rothschild Baroness Plots Swiss Private Bank Expansion After Bid
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Ariane de Rothschild spent four years reorganizing the sprawling family businesses, ranging from a private bank to wine estates and even a hotel in the ski resort of Megeve, seeking to ready the Swiss lender for its next phase of expansion.
Those plans may now move into overdrive after the family offered to take majority-owned Swiss wealth manager Edmond de Rothschild private. The planned changes to the banking group -- which include folding the French business into the Swiss business and handing over day-to-day management to Vincent Taupin -- are the final touches in de Rothschild’s attempts to make the bank more competitive in a fragmented market serving the rich.
“We have been playing catch-up for years, given how complex and hard to understand our structure was previously,” de Rothschild, wife of Benjamin de Rothschild -- whose family controls 83 percent of the bank -- said in an interview in Geneva. The bank has looked at “various targets” in recent years and remains on the lookout for acquisitions, she said.
The bank’s bid to go private comes amid widespread speculation that further consolidation is needed in the Swiss private banking industry, with analysts and bank executives suggesting the market is too fragmented with profit margins under pressure. Vontobel -- a Swiss peer that is also owned by a billionaire family -- made one of the largest deals of late, buying Notenstein La Roche Private Bank Ltd in May 2018 for 700 million Swiss francs.
The Swiss branch of the sprawling Rothschild banking dynasty -- once one of the world’s richest families -- was created by Baron Edmond de Rothschild, whose parents fled to Switzerland during World War II. He created the group in 1953, later buying a Swiss private bank and branching out into asset management. Benjamin de Rothschild succeeded his father as head of the group in 1997. Edmond de Rothschild had sparred with another family offshoot, French bank Rothschild & Cie, over the use of the family name, though both sides came to an agreement last year.
Edmond de Rothschild (Suisse) shares rose 6.7 percent as of 2:12 p.m in Zurich, after earlier gaining as much as 8.5 percent. The stock closed on Tuesday at 16.4 francs.
The Edmond de Rothschild group has more than 170 billion Swiss francs of assets under management and more than 1.1 billion Swiss francs of revenue, according to the statement. Its range of non-financial activities -- from wine estates in France, Spain, South Africa, New Zealand and Argentina, to luxury hotels and agriculture, including a farm close to Paris that makes cheese -- is grouped under Edmond de Rothschild Heritage.
The changes in the legal structure won’t lead to job cuts, said Ariane de Rothschild, who took the helm of the group in 2015.
Banks and asset managers across Europe reported a tough end to 2018 as markets tumbled in the last two months of the year, causing clients to pull money out of stocks and hoard cash. Larger Swiss rival Julius Baer Group cut financial targets and pledged cost reductions that include eliminating about 140 jobs after assets under management shrank last year. Vontobel Holding AG said net new money from clients was flat in the second half.
Still, Edmond de Rothschild’s assets under management have been rising in recent years as equities rose worldwide and customer assets swelled. That allowed Switzerland’s hundreds of private banks to reap profits even as tighter regulations and the loss of the nation’s prized bank secrecy squeezed margins.
With stock valuations becoming more volatile, some banks are now being bought out - while others, like Edmond de Rothschild - are reconsidering the benefit of a stock listing.
Edmond de Rothschild (Suisse) SA had net income of 222 million francs last year, helped by non-recurring gains, while its operating result was 120 million.
By taking it private , “we are demonstrating our commitment to our banking group and our ambitions for growth, both organic and through acquisitions,” Benjamin de Rothschild, chairman of Edmond de Rothschild Holding’s board of directors, said in the statement. Ariane, as president of the executive committee, exercised day-to-day control of the business.
“It was extremely difficult to make any sense of it," de Rothschild said. "We are aligned with the other banks now.”
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