EFG Wants to Pay Less for BSI

EFG International had a difficult 2016 – and BSI, which the Swiss private bank acquired towards the end of the year, also lost client funds. Now, EFG wants to pay less than originally agreed for the Ticino-based bank.

EFG International had net income according to IFRS of 339 million Swiss francs last year, the company said in a statement today. The profit was to a significant degree was due to the acquisition of BSI, concluded in November. On a «standalone» basis, EFG International would have looked less favorable, with net income of 91 million francs.

EFG, the bank led by CEO Joachim Straehle, also shed assets of 500 million francs, with major outflows in Asia and the U.S.

«Net new asset generation was impacted in particular by challenging conditions in Asia, where net asset outflows stood at 1.8 billion francs over the year, mainly driven by client deleveraging and regularization,» EFG said.

Billions in Outflows

BSI couldn't offset the outflows. The bank recorded client withdrawals of 4.9 billion francs in November and December of 2016. Taken together, the two banks suffered an outflow of 5.4 billion francs last year.

Together with those of BSI, EFG now manages 145 billion francs – making it one of the five biggest Swiss private banks.

BTG Objection Expected

Following the loss of assts, the buyer now hopes to pay less for BSI: last month, EFG sent a formal valuation the Brazilian investment bank BTG, the seller, demanding a reduction of the agreed deal price 1.06 billion francs. EFG wants to pay about a quarter less, or 277.5 million francs, for BSI. BTG likely will contest the demand by EFG.

EFG also managed to slash costs, a common theme among private banks struggling under the heft of negative interest rates, rising compliance costs, and a shift away from banking secrecy in Switzerland. The combined bank aims to cut spending by 240 million before taxes until 2019.

Massive Job Losses

EFG exceeded its annual cost-cutting target last year, not least thanks to 30 million francs in so-called synergies. The spending reduction is largely due to massive job losses: the bank group will cut as many as 450 jobs – two-thirds of them in Switzerland, as finews.com previously reported.

EFG had 1,959 full-time-equivalent jobs in banking at the end of the year, which translates to a 10 percent drop from a high in September of 2015, the private bank said. It was also below the bank's own year-end target of 1,990.

The combined EFG-BSI bank had 3,570 employees at year-end.

Dividend Unchanged

EFG's capital cushion improved with the acquisition of BSI: its common equity Tier 1 ratio stood at 18.2 percent, and the overall ratio at 20 percent. The bank plans to pay an unchanged dividend of 0.25 francs per share.

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