BOC to sell its private bank unit in Switzerland

A Bank of China Ltd branch in Xuchang, Henan province. The bank sold its Swiss unit to Switzerland's largest private bank after attempting to set up a private banking operation there by itself for four years. [Photo/China Daily]

Bank of China Ltd, one of China’s four biggest commercial lenders in market value, has sold its Swiss unit to Switzerland’s largest private bank after having tried for four years to set up a private banking operation in the European country.

It announced on Monday that Julius Baer Group Ltd will take over Bank of China (Suisse), which has less than 1 billion Swiss francs ($1 billion) in assets.

This is the first time the Chinese lender has sold an overseas institution.

A senior executive at BOC told China Daily that one of the main reasons for the sale was its weaker-than-expected performance.

The two sides have agreed upon a reasonable price for the deal, said the executive, who declined to elaborate.

"Selling the Swiss arm after four years doesn't mean BOC will stop developing private banking across Europe. It just reflects our consideration to further integrate local business," said the senior executive.

Apart from Switzerland, the lender has also entered the overseas private banking business in Luxembourg, Singapore, as well as Hong Kong and Macao.

"The primary goal when we set up the unit was to develop private banking. But local rivals are too strong. It's very difficult for a foreign bank to develop its business there. So we think it's better to cooperate with local private banks," the 21st Century Business Herald cited a source at BOC's private banking division as saying.

In a statement issued on Monday, the two lenders said they have reached a strategic cooperation agreement whereby they will mutually cross-refer clients and undertake various joint marketing activities.

BOC will refer clients with international private banking needs outside the Chinese mainland to Julius Baer, while Julius Baer's clients requiring commercial banking services will be referred to BOC, according to the agreement.

The two companies will also cooperate in product distribution, financial market research, and certain joint initiatives such as investment conferences, said the statement.

Li Lihui, vice-chairman and president of BOC, said its cooperation with Julius Baer complements the lender's existing private banking capabilities.

BOC is trying to focus its efforts in offshore Asia in terms of private banking business, the Financial Times reported on Tuesday.

It is preparing to launch a new service in Hong Kong and Macao later this year, the newspaper reported.

It has been investing in systems and people ahead of a formal rollout of a new private banking service under Bank of China International, its investment bank, in the fourth quarter, the FT cited two sources familiar with the matter as saying.

"It's quite reasonable for Chinese lenders to put more emphasis on the Asian market in terms of private banking. When major foreign players accelerate their pace of expansion in the region, domestic lenders should keep in mind that there is a big market in Asia," said Guo Tianyong, banking research director at Central University of Finance and Economics.

He said Chinese banks lack sophisticated products and sufficient experience with regard to private banking, and can hardly win mature markets, especially in a country such as Switzerland, which has special banking operation methods and traditions.

"BOC, which has many more overseas institutions compared with other major banks in China, should continue to do some streamlining to make its overseas business more efficient and profitable."

By the end of 2011, BOC had established 3,699 wealth management centers, 166 prestigious wealth management centers and 19 private banking centers in the Chinese mainland, while also making initial progress in developing Asia-Pacific and European wealth management platforms, it said in its annual report.

By the end of 2011, the number of its middle and high-end customers increased by more than 80 percent. And the number of private banking customers grew by more than 60 percent, with assets under management reaching 300 billion yuan ($47.2 billion).

Boris Collardi, CEO of the Swiss group, said the partnership would help expand its presence in China, one of the world's most important and fastest-growing wealth markets.

Julius Baer reported a near 20 percent increase in first-half net profits to 175 million Swiss francs, mainly driven by strong inflows from emerging markets.

wangxiaotian@chinadaily.com.cn