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Kleinwort Benson in ownership shake-up as losses reach £14m

Kleinwort Benson in ownership shake-up as losses reach £14m

Kleinwort Benson's wealth management division racked up losses of £13.9 million in 2013, as the bank's acquisition of German private bank BHF completed. 

Kleinwort Benson Wealth Management (KBWM) said pre-tax losses of €16.8 million (£13.9 million) over the year to the end of December could be attributed to the 'challenging low interest rate and tight credit spread environment, our cautious approach to balance sheet management, as well as our programme of investment in banker hires and systems infrastucture enhancements'.

This compares to 2012 when the private bank was in the black with a €1.1 million (£0.9 million) pre-tax profit.

In the same statement, parent company RHJ International announced its acquisition of German private bank BHF for €340 million (£281.5 million) had completed. The deal sees Kleinwort Benson acquire a 91% stake in BHF for a total cash consideration of €309.4 million.

The acquisition also sees the ownership structure of Kleinwort change, with RHJI's stake falling from 100% to 65.8% and three new investors entering the fray. They are Chinese investor Fosun which took a 19.2% stake after a €98.5 million investment, alongside German entrepreneur Stefan Quandt who who holds a 12.4% position following the deal for a cash contribution of €63.7 million. Timothy Collins' Windmere and Collins trust also now holds a 2.7% stake after a €13.6 million investment.

'2013 has been a mixed year for KBWM. We have seen good growth in our asset base and loan portfolio, with growing momentum in businessreflected in new business flows being generated by our senior banker hires, recent mandate wins and the quality of our pipeline,' RHJ International said in its full-year results.

'Against this, the business generated a segment loss of £11.7 million.'

Meanwhile, the private bank grew assets under management (AUM) by 14% over the year to £5.9 billion. The bank said over half of this growth was down to a £399 milion net inflow across asset management and deposits, while 'positive markets' accounted for £321 million of AUM growth.

AUM within the firm's discretionary and advisory arms increased by 13% to £4.4 billion, which it attributed to new hires.

BHF acquisition

RHJ International hopes the deal will create a European private banking powerhouse. The business combination will lead to a 270% asset rise to €26.3 billion, while income will increase by 125% to £122.4 for the combined private banking business.

Leonhard Fischer, chief executive officer of RHJ International, said: 'The combination of Kleinwort Benson and BHF, with its robust capital position and low risk balance sheet, provides us with a solid foundation to capture the strong growth that is expected in the German and UK wealth management markets, with the combination of our highly-complementary asset management operations also providing opportunities for revenue growth.

'Combined with the ongoing management of our cost base and the synergy savings that we expect to achieve across our wealth management operations, we are well-placed to drive long-term profitable growth and shareholder value creation.'

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