Written By: Darren Morris – Corporate Finance
Swiss banks have had to totally change their approaches for wealthy clients, because of fiscal-transparency obligations. After the Crédit Suisse and UBS scandals, the Swiss banking sector had to clean up their image regarding tax evasion, which pushed them to sign multilateral tax-transparency agreements with just over 100 countries. Many Swiss wealth-management banks had to decide last year to no longer serve customers in countries that did not sign the automatic information-exchange agreement. This clarification led for sure to decreases in their managed assets, while some clients had to leave Swizerland for lower-tax countries.
Thus, depending on the impact on their assets of the new tax regulations (FATCA, Foreign Account Tax Compliance Act, for the United States and CRS, Common Reporting Standard, for OECD, Organisation for Economic Co-operation and Development, countries), strategical questions for wealth-management companies arose about leaving Switzerland, or staying and developing from then on new markets.
The Swiss wealth-management industry is looking to new markets in Asia.
Wealth-management activities for Asia developing from bases in Switzerland makes sense. The Asian wealth-management market is progressing fast, and the Swiss know-how is well-known to wealthy Asian families. Switzerland is politically and economically stable, and it is benefiting from a historically long reputation of friendly attitudes towards rich families. Tax rates remain low, especially for family or company holdings (0.2 percent in the Valais). Confidentiality and security have made Switzerland a first-ranked financial destination for private fortunes.
Not surprisingly, many wealth-management companies have decided to stay in Switzerland but expand to Asia through Asian subsidiaries, mostly situated in Hong Kong or Singapore. Those two financial places are indeed also benefiting from similar stable and trustful reputations, as well as tax regimes that favour entrepreneurs.
Crédit Agricole (one of the largest French banks) is exactly positioning itself in this move.
Indosuez Wealth Management, Swiss Crédit Agricole’s subsidiary, recently stated that it was on the lookout for redemptions. And that’s what it just achieved, as the French bank Crédit Agricole has announced resuming Crédit Industriel et Commercial (CIC) activities in Asia, particularly in Hong Kong and Singapore. The private bank has bought the holding-company Investor Services in Hong Kong and a Singapore division of CIC. Indosuez Wealth Management is strengthening its presence in those two strategic places. The two sides, which had begun exclusive negotiations on June 16, reached an agreement. The acquisition is expected to be completed by the end of the year and remains subject to the approval of the competent authorities. Both parties are committed to facilitating the transition for employees, customers and partners. The establishment did not disclose the amount of the transaction. According to CIC’s annual report, however, it is known that the funds managed in the region amount to $6 billion, in addition to the assets of Indosuez in Asia, reaching a total of $14 billion. CIC employs 150 people in its two Asian locations, while Crédit Agricole has 220 employees in the region. Indosuez Wealth Management has been in the area for more than 100 years.
“This acquisition is perfectly within our target in terms of size. It is not too big, which could have slowed the integration, but important enough to make us grow in this part of the world which is particularly dynamic,” said Jean-François Deroche, CEO of CA Indosuez (Switzerland). “Our presence in Asia now represents more than 30 percent of our activities.” He also gave assurances that the bank, installed since 1905 in Singapore and since 1894 in Hong Kong, is profitable there. The transaction has a particular impact on Switzerland as its CA Indosuez entity manages the group’s asset-management activities outside the European Union.
From Geneva, the group thus manages Swiss activities but also Asian, Middle Eastern and Latin American activities.
Switzerland is in the center of Europe but not of the European Union. In the case of CIC, Indosuez acquired a management company in Hong Kong (Investor Services). In Singapore, this is the division within CIC that will be transferred to Indosuez. “We have seen a lot of opportunities, as the players present must now choose to stay and strengthen or to leave and strengthen elsewhere or in other areas,” explained Jean-François Deroche. For the group, this acquisition is also an indirect way to show that Switzerland remains a pillar of its strategy. “It represents 35 to 40 percent of the group’s private banking business,” Deroche claimed.
In 2015, Jean-Yves Hocher, deputy managing director of Crédit Agricole, responsible for corporate and investment banking and asset management, insisted that “leaving Switzerland would mean abandoning the wealth management business”. Two years later, “we are still convinced of the attractiveness and expertise of the Swiss market, which remains a global pole of private banking,” Jean-François Deroche repeated, at a time when several foreign banks decided to “fold up” their luggage.
By the end of 2016, Indosuez Wealth Management Switzerland had managed 39.3 billion francs, had a gross profit of 138.6 million francs and had 1,352 employees. At the beginning of 2016, the entity then called Crédit Agricole Private Banking became Indosuez Wealth Management, a global brand in the asset-management business of the Crédit Agricole Group.