EFG International aims high – but has to issue a profit warning for the first quarter. Shareholders today will decide about raising the capital for buying BSI private bank.
EFG International, the Zurich-based private bank, today will hold its annual general meeting and ask for shareholders' approval to take over BSI, the Swiss unit of BTG Pactual.
EFG plans to issue as many as 81,687,345 new shares, slightly less than it originally planned for. A further 75,958,871 new shares will be awarded to BTG Pactual, the Brazil-based seller.
Disappointment
A company attempting to convince shareholders to raise new capital in a quest to grow its business will usually try to shine. EFG however doesn't make a convincing show with the presentation of the first-quarter figures as the company readily admits.
The bank was faced with difficult market conditions, customers reluctant to invest and increasing personnel costs, EFG said. Net new money in Switzerland, Europe and the U.K. was positive, but assets under management in general proved «disappointing».
Challenging Business in Latin America
Reasons for this sobering conclusion were a challenging business environment in Latin America and the failure to replace an investment product in Asia which expired due to the difficulties on equity markets. Revenue declined from a year earlier, thus the profit warning.
The private bank also was faced with negative news in North America. The U.S. insurer Transamerica increased its premiums for policies that are part of the life insurance portfolio of EFG. EFG plans to take Transamerica to court and warns that further increases for other policies would substantially affect the value of the portfolio. The issue however seems at least to have developed more positively over the course of the year, according to the bank.
Cost-Cutting Plan on Track
EFG is also upbeat about the completion of its cost-cutting program, which will yield savings of about 30 million Swiss francs by the end of 2016 and remains on track. Furthermore, the company remains convinced that the takeover of BSI is still on track and is busy working on the transaction.
