Societe Generale Plans Sale of U.K. Private Banking Arm

(Bloomberg) --

Societe Generale SA is planning a retreat from U.K. 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, Societe Generale bought the U.K. wealth management operations of Oddo & Cie's BHF Kleinwort Benson Group SA unit, which traces its roots back to 1786, and merged it with its own Hambros division. The combined business managed about 14 billion pounds ($17.6 billion) of assets as of the end of last year in offices the U.K., Guernsey, Jersey and Gibraltar.

Societe Generale 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 NV and reached a deal to offload its Polish retail arm. Societe Generale has also been exploring a sale of its Nordic equipment leasing operations, people with knowledge of the matter said last month.

Representatives for Societe Generale and Rothschild declined to comment.

While Societe Generale is exiting its U.K. business, other banks are bulking up. Union Bancaire Privee agreed to buy London-based wealth manager ACPI Investment Managers last year. Julius Baer Group Ltd. is also adding relationship managers under its U.K. 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 like China and India. In the past 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.

Societe Generale Chief Executive Officer Frederic Oudea is cutting about 1,600 jobs across the bank and plans to slash annual costs by about 500 million euros ($564 million). 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 assistance from Dinesh Nair.

To contact the reporter on this story: Jan-Henrik Förster in London at jforster20@bloomberg.net

To contact the editors responsible for this story: Dinesh Nair at dnair5@bloomberg.net, Ben Scent, Amy Thomson

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