Within days of announcing additional stake sell in Citizens Financial Group, Inc., The Royal Bank of Scotland Group plc RBS has decided to vend the international unit of its private bank, Coutts International, to Switzerland-based Union Bancaire Privée UBP SA. Though the financial terms of the deal were not disclosed, market rumors suggest the sale price to be roughly CHF350—CHF400 million ($360—$410 million).
Notably, according to Royal Bank of Scotland, the sale price would be determined partially by calculating value of assets under management (“AUM”) at the time of closing, and the company expects to receive a premium. As of Dec 31, 2014, Coutts International’s AUM stood at nearly CHF32 billion.
Royal Bank of Scotland will likely incur a charge of £200 million ($299 million) related mainly to goodwill write-off in first-quarter 2015, owing to the sale of Coutts International. The deal, still awaiting regulatory approvals, is expected to close by year-end and full transfer would take place by early 2016. The Goldman Sachs Group, Inc. GS advised Royal Bank of Scotland on the deal.
Royal Bank of Scotland stated that the sale will likely include 15,000–20,000 customer relationships outside the British Isles, those managed from Switzerland, Monaco, UAE, Qatar, Singapore and Hong Kong. Notably, the bank will continue to provide services to its UK Private Banking and Wealth Management clients, along with international clients who have strong connection to the UK through its Coutts and Adam & Company brands.
For Union Bancaire Privée, the transaction is expected to bolster its presence in Asia, Central and Eastern Europe, and the Middle East. Of late, the company has been expanding inorganically – acquiring Swiss operations of ABN AMRO Group NV and Lloyds Banking Group LYG. Nevertheless, the firm will not be taking liability for Coutts International’s ongoing legal issues.
Similar to other banks having presence in Switzerland, Coutts International has joined a U.S. Justice Department self-reporting program which is intended to discover untaxed American assets. Notably, while revelation could lead to penalties for banks, it could also offer guarantees about not getting prosecuted in the U.S.
Royal Bank of Scotland has lately been striving hard to regain profitability, and as part of that, is focusing on its UK operations. The company is undertaking several initiatives to lower expenses and improve its capital ratios.
We believe that with the above-mentioned deal, Royal Bank of Scotland is taking a step in the right direction, which would serve to improve its probability in the long run.
Currently, Royal Bank of Scotland carries a Zacks Rank #3 (Hold). A better ranked foreign bank is ICICI Bank Ltd. IBN, with a Zacks Rank #2 (Buy).
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