HSBC Sells $12.5B Swiss Private Banking Assets to LGT Bank - Analyst Blog

U.K.-based HSBC Holdings plc (HSBC) has announced the sale of its Switzerland-based portfolio of private banking assets worth $12.5 billion to LGT Bank (Switzerland) Ltd, a wholly owned subsidiary of LGT Group Foundation of Liechtenstein. This latest move by HSBC underscores its strategy of reducing costs and improving profitability by shedding non-core businesses and emphasizing on higher-margin businesses.

Subject to usual regulatory approvals, this asset sell-off through the Geneva, Switzerland-based HSBC Private Bank (Suisse) SA, a wholly owned subsidiary of HSBC, is expected to complete by the end of fourth-quarter 2014. The terms and conditions of the transaction have not been disclosed yet, but it is expected to be an all-cash deal.

HSBC has operations in over 75 countries and as of Mar 31, 2014, had assets worth of $2.76 trillion. In recent times, there has been a shift in HSBC's business strategy as it attempts to concentrate on markets with high growth potential and scale back its non-core operations.  

Only a week ago, HSBC Life (UK) Limited, a wholly owned subsidiary of HSBC, inked a deal to vend off its UK pension business to ReAssure Limited, a wholly owned subsidiary of Admin Re, a Swiss Re unit.

Per the latest deal, the $12.5 billion worth private banking assets of HSBC will be integrated into the LGT Bank in Switzerland, which had about $24 billion in assets under management at 2013 end. The new portfolio is expected to improve LGT Bank's wealth management business in several markets, including Central and Eastern Europe, Latin America and Western Europe.

Similar to HSBC, many other major global banks are now seeking to curtail non-core operations so as to use capital optimally for shareholders' benefit. Last month, Deutsche Bank AG DB inked a deal to sell off the Las Vegas casino resort, The Cosmopolitan, to a private equity group – The Blackstone Group L.P. BX – at a price of $1.73 billion. HSBC's present divestiture echoes the same strategy.

Currently, HSBC carries a Zacks Rank #3 (Hold). A better-ranked foreign bank is BBVA Banco Franc BFR. BBVA Banco carries a Zacks Rank #1 (Strong Buy)