LGT Agrees to Buy Swiss Private Banking Assets From HSBC

Jun 24, 2014 10:14 am ET

(Updates with company comment in third paragraph.)

June 24 (Bloomberg) -- LGT Group, the bank owned by the family of the prince of Liechtenstein, agreed to buy more than 10 billion Swiss francs ($11.2 billion) of client assets from HSBC Holdings Plc’s Swiss private bank.

The deal includes rich clients “across geographies,” and about 70 employees, Vaduz-based LGT said in a statement today. The price wasn’t disclosed. LGT’s Swiss bank had about 21 billion francs under management at the end of last year, the company said.

“This is part of our growth strategy,” Patrick Humphris, a Geneva-based spokesman for HSBC said by telephone. “It’s not about pulling back from private banking and it’s not about pulling back from Switzerland in any way.” The transaction “completes the strategic repositioning of the Swiss private bank,” he said.

Profitability at private banks in Switzerland has come under pressure amid U.S. and European probes into whether they helped foreign clients dodge taxes. The changing environment has prompted several banks to change their strategy in the country. Morgan Stanley in April agreed to sell its private banking business in Switzerland to J. Safra Sarasin Holding Ltd.

Under Investigation

HSBC’s Swiss private banking unit is among about a dozen banks under investigation by the U.S. Justice Department for allegedly helping Americans hide money from the state. Information provided by Herve Falciani, a former HSBC software technician in Geneva, accused by the bank of stealing data of private-banking clients, led to investigations by tax authorities in France, Spain and the U.K.

Credit Suisse Group AG, Switzerland’s second-biggest bank, had to plead guilty and pay a fine of $2.6 billion last month to end a similar investigation by the U.S. Justice Department.

“The assets to be acquired have undergone rigorous tax and general compliance procedures,” LGT said in its statement.

There are 106 Swiss banks participating in the Category 2 of a U.S. program, which requires banks to disclose data on undeclared accounts by Americans and pay penalties in exchange for a non-prosecution agreement.

LGT’s Swiss subsidiary is taking part in Category 3 of the program, a spokesman said by telephone. That means it doesn’t believe it has violated U.S. tax law, according to the terms of the program.

HSBC’s private bank has about 1,400 employees in Switzerland, where it managed $84 billion at the end of last year, according to Humphris. The private bank’s assets under management globally amount to $382 billion, he said.

HSBC, Europe’s biggest bank, has closed or sold more than 60 businesses since 2011 as Chief Executive Officer Stuart Gulliver focuses on its most profitable markets and controls costs. This month, the London-based lender agreed to sell its U.K. pensions business to Swiss Re Ltd. for an undisclosed sum.