Credit Suisse buys Morgan Stanley's European wealth arm
Credit Suisse is buying Morgan Stanley's wealth management arm in Europe, the Middle East and Africa, acquiring $13 billion in assets in a move to offset exposure to more volatile investment banking.
The assets are tiny by the standards of Credit Suisse's private banking operation, the world's fifth-largest with nearly 800 billion Swiss francs ($843 billion) under management.
"Credit Suisse sees more daily fluctuation of their assets under management due to market movements and foreign currency swings than this deal size," said Zuercher Kantonalbank analyst Andreas Venditti, who has a "market weight" rating on the stock.
But the deal underscores Credit Suisse's efforts to beef up private banking, which tends to deliver a smoother revenue stream than investment banking.
For its part, Morgan Stanley is placing its wealth management focus on the United States, where Chief Executive James Gorman is hoping for more stable returns to compensate for the uncertain rewards from trading and investment banking.
Details of the deal - one of Credit Suisse's first notable acquisitions since it bought out the remainder of Brazilian investment fund Hedging-Griffo in 2011 - were not disclosed. It said it expected to complete the purchase later this year.
Hometown rival UBS has also focused on private banking, but began reducing its exposure to fixed-income investment banking dramatically last October.
Credit Suisse is also trying to slash costs at the private banking operation by 1 billion francs by 2015 and has already folded the smaller asset management arm into that unit.
In 2011, Credit Suisse said it would integrate Clariden Leu, a private bank it owned but allowed to operate independently.
Credit Suisse says the integration has been a success, but some clients have withdrawn funds.
A CAUTIOUS ACQUIRER
Credit Suisse said last month that net new assets from wealth management clients - a key indicator of future revenue - tumbled 28 percent to 2.9 billion francs in the fourth quarter.
Like UBS , it suffered big outflows of money from clients in Europe, where Swiss banks are under fire for helping wealthy foreigners avoid paying tax.
Credit Suisse's private bank is also grappling with a U.S. investigation into offshore accounts at the bank, for which it set aside 295 million francs in provisions in 2011.
Switzerland is trying to get the U.S. investigation dropped in exchange for the payment of fines and the transfer of names of U.S. clients.
Under Chief Executive Brady Dougan, Credit Suisse has been a cautious acquirer, save for Hedging Griffo. Most recent dealmaking has centered around divestments, including the January sale of its exchange-traded fund (ETF) business to BlackRock as part of a capital-raising plan.
Morgan Stanley spokesman James Wiggins said the bank is changing its international wealth operations to boost profits.
High net-worth clients in Asia and Latin America will be covered from its Swiss bank, he said.
In January, the U.S. bank's wealth management division reported a 17-percent pretax profit margin, beating an internal target months ahead of schedule.
(Additional reporting by Lauren Tara LaCapra in New York; Editing by Tom Pfeiffer and David Cowell)