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Two Swiss private banks agree deal to build global giant

Zurich-based private bank, EFG International, has agreed a deal with Brazilian bank BTG Pactual to buy its Lugarno-based private banking unit BSI, one of the oldest Swiss banks, for about CHF1.33bn ($1.34 bn, £940m) in cash and stock.

When combined, the deal will make EFG one of the largest private banks in Switzerland with around CHF170bn in assets under management (as at 31 December 2015) and give it a significant competitive position in the growing worldwide wealth management market.

The new private bank will have a strong presence in Switzerland, Europe and the UK, and almost double the current assets under management in Asia and Latin America.

EFG said the merger with BSI was a milestone in the ongoing consolidation in the private banking industry in Switzerland, and underlined the need for scale and stability in a period of intensified market and regulatory challenges.

Swiss private banks have come under increasing pressure from US and European tax authorities to increase transparency with recent settlements expected to clear the way for further consolidation in the industry.

The deal was also announced as EFG reported its net profits had fallen to CHF57.1m last year from CHF61.4m in 2014 after its $29.9m settlement under the US tax programme.

Global scale

EFG, which currently has strong positions in the UK, Spain and Hong Kong, will gain the advantages of BSI’s big presence in the Middle East and in Singapore. In addition to Switzerland, both banks have also have operations in Luxembourg and Monaco.

It is expected that both brands will be retained after the deal is completed, which is likely by the end of this year, and the combined company will keep Zurich, Geneva and Lugano as key locations for the governance and operation of the combined bank.

Joachim Straehle, chief executive of EFG International said: “By combining the complementary strengths of BSI and EFG, we are forming a leading global private bank with strong roots in all language regions of Switzerland.”

 “The combined business will be a strong, solid private bank of substantial scale, and will provide an even more powerful value proposition to clients and client relationship officers (CROs),” he said. When combined the new private bank will have 860 CROs.

After the deal is approved BTG Pactual will end up with a 20% stake in EFG while the EFG Group, a Swiss holding bank based in Geneva ultimately controlled by the Latsis family, will remain largest shareholder with over 35%.

Part of the Mark Allen Group.