First International Bank of Israel (TASE: FTIN) is liquidating its remaining international business, and will become the only one of Israel's five leading banks that operates exclusively in Israel. Controlled by Zadik Bino, the bank today announced that it had signed an agreement to sell FIBI Switzerland to Swiss bank CBH.
CBH will acquire FIBI Switzerland's customer portfolio, which totaled 876 million Swiss Franc as of September 30, for seven million Swiss francs, amounting to 0.8% of the assets. CBH will also pay an amount equal to FIBI Switzerland's equity, which totaled 59.2 million Swiss francs as of September 30. The deal is slated for completion by the end of the first quarter of 2017.
First International stated that the deal is not expected to materially affect its results. The current deal involves only the bank's customer assets; First International is likely to also sell its bank building in Zurich.
CBH, controlled by Joseph Benhamou, has been active in private banking for 40 years. Its headquarters are in Geneva, but it has business in various locations around the world, including an office in Tel Aviv.
"The acquisition of FIBI Switzerland's business enables us to significantly increase our activity, and we welcome all of the new customers," said CBH general manager Philippe Cordonier.
First International, managed by CEO Smadar Barber-Tsadik, began cutting back on its overseas business when it sold FIBI London two years ago for a nominal £6 million price. FIBI Switzerland's business has been declining, with the volume of its customer assets falling 4% in the first nine months of 2016. The Swiss subsidiary's loss has also grown over the past year, totaling 630,000 Swiss francs in the first nine months of 2016, compared with 62,000 Swiss francs in the corresponding period last year.
In contrast to other Israeli banks doing business in Switzerland, FIBI Switzerland was not the subject of an investigation by the US authorities into suspected abetting of tax evasion. The bank nevertheless suffered from diseconomies of scale that have made its activity unprofitable. Following changes in banking regulations in general and private banking in particular, the banks' costs incurred in private banking business have greatly increased, making economies of scale a major factor. On the other hand, Swiss banking confidentiality has been eroded, so the banks have no substantial value to offer their customers.
As a result of these trends, the trend in overseas private banking is towards consolidation, with many entities, including most Israeli banks, deciding to downsize their activity in the segment. Bank Leumi (TASE: LUMI) and Israel Discount Bank (TASE: DSCT) have also sold their business in Switzerland in recent years. Bank Hapoalim (TASE: POLI) recently sold some of its overseas private banking business, and may very well sell the rest in the future.
On the other hand, some concerns are taking advantage of this trend to make acquisitions and expand, and CBH is one of them. CBH has made several acquisitions around the world in recent years, including the private banking business of Privee Espirito Santo and investment management company TTG.
Published by Globes [online], Israel business news - www.globes-online.com - on December 20, 2016
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