Picture: BLOOMBERG
Picture: BLOOMBERG

London — Société Générale is planning a retreat from UK private banking just three years after making a major acquisition to expand in the market, people with knowledge of the matter said.

France’s second-largest lender has started to gauge interest from potential buyers for its Kleinwort Hambros business, according to the people, who asked not to be identified because the information is private. It is working with Rothschild & Co on the deal, the people said.

In 2016, Société Générale bought the UK wealth management operations of Oddo & Cie’s BHF Kleinwort Benson Group unit, which traces its roots back to 1786, and merged it with its own Hambros division. The combined business managed about £14bn of assets as of the end of 2018 in offices the UK, Guernsey, Jersey and Gibraltar.

Société Générale has been divesting non-core assets as it seeks to boost its capital ratios. Last year it agreed to sell its Belgian private banking unit to ABN Amro Group and reached a deal to offload its Polish retail arm. Société Générale has also been exploring a sale of its Nordic equipment leasing operations, people with knowledge of the matter said last month.

Representatives for Société Générale and Rothschild declined to comment.

While Société Générale is exiting its UK business, other banks are bulking up. Union Bancaire Privée agreed to buy London-based wealth manager ACPI Investment Managers last year. Julius Bär Group is also adding relationship managers under its UK head, David Durlacher.

Private banks have benefited from growing pools of wealth over the past decade amid supportive central bank policies and the rise of billionaires in countries such as China and India. In the past few years they’ve started facing margin pressure due to rising compliance costs and regulatory pressures.

Valuing the businesses can be tricky. Purchase prices tend to range from 1% to 2% of assets under management, though that metric isn’t a guarantee of future revenues if clients are unwilling to make investments.

Société Générale CEO Frédéric Oudéa is cutting about 1,600 jobs across the bank and plans to slash annual costs by about €500m. The bank’s common equity tier-1 capital ratio declined over 2018 and remains below its 2020 target of 12%. The metric rebounded at the end of March, partly thanks to proceeds from asset disposals and the refocusing of some markets activities.

With Dinesh Nair.

Bloomberg