Royal Bank of Canada will buy some overseas divisions of the Coutts private banking business from Royal Bank of Scotland, giving RBC access to high net worth individuals in fast-growing emerging markets.
Canada’s largest bank is buying Coutts’ Latin American, Caribbean and African private banking arms, which managed around £1.5-billion ($2.4-billion Canadian) of assets, in line with RBC’s long-lived promise to build its global wealth management business.
“This business represents an excellent opportunity to increase our market share with high net worth and ultra high net worth clients in key high growth markets, while delivering very attractive returns,” said George Lewis, group head, RBC Wealth Management, in a statement.
Terms of the deal were not disclosed. While the acquisition adds only fractionally to RBC’s $302-billion in assets under management, analysts said the bank has been looking to allocate capital outside of Canada’s low-growth environment.
“(The acquisition) has growth benefits, low capital intensity, low earnings volatility - so it’s an attractive outlook for their capital,” said Moody’s senior financial services analyst David Beattie.
“It is interesting, and obviously positive directionally ... the kind of business that would be viewed favourably.”
Coutts, which was founded by Thomas Coutts in the 18th century, is one of Britain’s best-known private banks. Its clients have included Queen Elizabeth II, sports stars and pop idols.
Toronto-based RBC already has a presence in the Caribbean but is working from a low base in Latin America and Africa.
The acquisition includes clients who reside in Latin America, the Caribbean and Africa, as well as key private banking staff based primarily in Geneva. It also includes a team in the Cayman Islands, RBC said.
“As the sixth-largest wealth manager in the world, we can offer these clients the very high level of personal service and global capabilities that they expect from a top tier international firm,” Mr. Lewis said.
RBS acquired the business as part of its takeover of British bank NatWest in 2000. In November 2011, Britain’s financial watchdog fined Coutts £6.3-million for failings related to the sale of a fund product during the run-up to the financial crisis.
For RBS, which is 82-per-cent owned by the British government after a state bailout during the 2008 credit crisis, the sale forms part of its program of selling non-core assets to focus more on its core UK retail banking business.
RBS said the sale was in line with Coutts’s strategy to focus on key markets such as the U.K., Switzerland, Russia, the Middle East and Asia.