Bank of America Corp. has put its wealth management units outside the United States up for sale, three sources familiar with the situation said, hoping to bring in up to $3-billion (U.S.) for the subscale business.
Bank of America is the world’s largest wealth manager, but its non-U.S. arm – which two of the sources said manages some $90-billion for rich clients – is not large enough to generate enough money for the U.S. bank.
“There is a lot of soul-searching going on by a lot of U.S. players as to what to do with their non-U.S. private banking operations,” said a fourth person, an investment banker who has knowledge of the financial sector.
Bank of America declined to comment.
The second-largest U.S. bank has lagged peers in recovering from the financial crisis, largely because of huge losses and lawsuits tied to its 2008 acquisition of subprime mortgage lender Countrywide Financial.
Bank of America’s non-U.S. private banking business targets so-called “mass affluent” clients whose wealth is measured in hundreds of thousands of dollars, rather than superrich private banking clients worth tens of millions.
But outside the United States, it has never been able to build the business to match the scale of its home market, meaning it is far less profitable.
Across the world, it manages close to $2-trillion of client assets, according to an annual benchmark study issued by consultancy firm Scorpio Partnership.
For a ranking of the world’s largest wealth managers, click on http://r.reuters.com/ben62s
The bank had asked potential suitors to put in first-round bids this week, according to one of the three sources, who spoke on condition of anonymity.
“The people I spoke to are not expecting this to be a particularly rapid process, just given the broad scope of the operations’ geography and the relative skinny information that was made available,” the source said.
Bank of America is looking to sell the unit as a whole and the deal could bring in up to $3-billion, the source said, or more than 3 per cent of assets under management.
“Three per cent of assets under management [is high]in Europe, but it is low in emerging markets. In Asia, it is perfectly possible to raise 4 to 5 per cent, and the same thing goes for Latin America,” the source added.
There is only a handful of possible bidders who could spend money on the business, this person said, naming UBS, Credit Suisse, Deutsche Bank, JPMorgan Chase & Co. and Wells Fargo.
Wealth management businesses do not generally contain equity capital, and there is no transfer of a legal entity, so the purchase price consists entirely of goodwill. This reduces the buyer’s regulatory capital, the source said.
“There are not that many buyers who could take a two-to-three billion-dollar hit against their core Tier I,” capital ratio, the person said.
In more than two years under chief executive officer Brian Moynihan, Bank of America has shed non-core businesses and investments in other companies, in a bid to boost capital and streamline the financial behemoth.
B of A has sold its Canadian and Spanish credit card businesses in the past year, and in March reached an agreement to sell its Irish credit card portfolio. The bank has also said it intends to sell its card business in Britain.