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Incompatible business models and widespread poaching of senior bankers have held back the expected wave of British private bank mergers, but the dam could break later this year.
After the credit crunch, many experts had predicted a rush of activity as distressed banks dumped non-core assets and wealth managers pounced on cheap acquisitions.
The industry has long been tipped for consolidation as even the largest player in the UK market, Barclays Wealth, has a market share of less than 10 percent. There is also low penetration of the total pool of wealth, which makes it attractive to foreign wealth managers.
Scorpio Partnership, a specialist consultancy, puts the size of the UK market at up to $5 trillion in assets owned by individuals worth at least $100,000, only two-thirds of which is managed through a financial adviser or private bank.
But mergers to date, such as Collins Stewart's acquisition last month of Guernsey-based investment manager Corazon, with 382 million pounds in assets, have been small.
"The consolidation is not taking place at that (top) level. That's not to say that those guys won't be making deals. They are making deals, but at the moment they're not buying each other," said Stephen Wall, a director at wealth management consultancy Scorpio Partnership.
The deal drought contrasts with continental Europe, which has seen a number of large acquisitions such as Julius Baer's BAER1.VX purchase of ING's Swiss private banking assets for 520 million Swiss francs last year.
Deutsche Bank became the largest wealth manager in the euro area last October by buying Sal Oppenheim Group for 1 billion euros.
Analysts say British wealth managers, offering highly personalised service to rich, demanding clients, do not make easy bedfellows in a merger.
"You can't have hostile acquisitions in these businesses ... Trying to find a company that has good people and a strong cultural fit is quite difficult," said Katrina Hart, a wealth management analyst at Canaccord Adams.
POACHING
One recent exception has seen Investec buy the 53 percent in wealth manager Rensburg Sheppards it did not already own. Investec's head of investor relations Ursula Nobrega said the firm's large minority stake meant it knew what it was getting, avoiding the pitfalls in an environment otherwise dogged by uncertainty.
Analysts note that aggressive hiring of senior staff from competitors - in the hope that they will bring clients and assets with them - has emerged as a cheaper and simpler alternative to buying entire companies.
Reputational damage suffered by some private banks during the financial crisis, as well as restrictions on performance-related pay has led to greater mobility among bankers.
The trend has allowed wealth managers to expand without the added complication of absorbing a former rival with a distinct business model and back-office systems.
"In the UK, private banks want teams and clients, they don't want other people's systems," said Bruce Weatherill, an independent wealth management consultant.
A recent example of poaching of private bankers was Rothschild's hiring of a team of former Morgan Stanley staff.
However, many in the industry believe a run of high-profile mergers is still on the agenda for later this year as companies recover from the financial crisis and foreign players seek an entry into the British market.
SWISS MOVES
Cannacord Adams' Hart said Swiss private banks could lead the charge, pressured in their home market by an international attack on banking secrecy that challenges their traditional business model.
At a conference in London last month, Julius Baer management said the firm was ready to consider acquisitions outside Switzerland including "selected European onshore markets".
They can expect to pay around 3 percent of assets under management for UK institutions, based on recent deals such as Investec's buyout of Rensburg Sheppards, valued at about 3.4 percent of assets.
High-profile, well-recognised brands have attracted higher valuations, such as the sale of Kleinwort Benson by Commerzbank to private equity buyer RHJ International in October for around 4 percent of assets.
Britain's private banking industry offers a range of trophy brands, many of which date back hundreds of years.
Coutts, which counts Queen Elizabeth among its clients, is commonly identified as a potential candidate for disposal by its state-controlled parent Royal Bank of Scotland. However, RBS has stated it considers Coutts a core asset.
Belgian group KBC is selling its private banking unit KBL European Private Bankers, which includes 200-year-old UK arm Brown Shipley. Lloyds Banking Group is also planning to sell its 60 percent stake in wealth manager St James's Place.