How L&C fits into the UBS plan for expansion

From Archive 02 March 2004

By PWM Editor

UBS announced last month its purchase of UK private client investment manager Laing & Cruickshank Investment Management (L&C), marking the Swiss bank’s most significant expansion in Europe to date. The deal was UBS’s third major wealth management acquisition in the past nine months. It will also bring the total amount of client assets bought by the Swiss bank in Europe to E9.5bn since May last year. Another Ł5bn (e7.5bn) will be added once the buyout of Scott Goodman Harris (SGH), UK adviser to high net worth individuals, is completed later this year.

In May 2003, UBS purchased Lloyds Bank in France from Lloyds-TSB group and in October it bought Merrill Lynch’s German wealth management business. The prices of the deals have not been disclosed by UBS. However, in terms of assets under management, the L&C and SGH deals eclipse both the Lloyds and Merrill Lynch purchases by far.

Under discussion

Owned by Crédit Lyonnais, the fate of L&C has been under discussion for some time. Acquired in 1987, it was never integrated with Crédit Lyonnais’s international private banking business and in 2000, the French bank was said to have appointed Lehman Brothers to sell the business for Ł200m. Of note, the price tag on the UBS deal is said to be around Ł150m.

Further evidence of the uncertain future of the L&C brand under French ownership came two years ago when the management team bought back a 25 per cent stake in the firm to secure its independence. However, the acquisition of Crédit Lyonnais by Crédit Agricole Indosuez (CAI) was likely the deciding factor. The CAI merged group has stated its plan to focus on the French retail business as its strategic priority, leaving L&C out on a limb in the UK wealth market.

Business profile

In terms of business profile, L&C manages around Ł5.1bn for wealthy clients – of which around Ł4bn is in discretionary assets. The minimum threshold is Ł100,000 for London clients and Ł50,000 for regional clients. UBS Private Banking has clients with SFr250,000 (e160,000), however this is the legacy of a restruc- turing of the private client business in 2002. The private bank’s true threshold is SFr500,000 and above.

L&C has been expanding in recent months and hired an eight-strong private client team from HSBC in December. L&C segments clients into groups including families, media and entertainment, sports and lottery winners. UBS has de-emphasised this type of client segmentation.

The UK stockbroker’s reputation for autonomy may also cause difficulties given the UBS group’s one-brand policy.

Target markets

That said, the UK is one of UBS’s five target markets for expansion, the others being France, Germany, Italy and Spain. Marcel Rohner, chief executive of UBS Wealth Management & Business Banking, stated in a strategy presentation entitled Going for Growth, that UBS will be seeking more wealth management acquisitions in these target countries.

The strategy presentation was also noteworthy for detailed plans on how UBS plans to implement the adviser-centric model outlined last year. There is a distinct softening of tone in the presentation, which states “price and breadth of service do not differentiate”. In other words, the focus will be on delivering a higher grade asset advisory solution rather than products.