Credit Suisse is buying Morgan Stanley’s wealth management arm in Europe, the Middle East and Africa, acquiring $13bn in assets in a move to offset exposure to more volatile investment banking, Reuters reported.
The assets are tiny by the standards of Credit Suisse’s private banking operation, the world’s fifth-largest with nearly 800 billion Swiss francs ($843bn) under management.
“Credit Suisse sees more daily fluctuation of their assets under management due to market movements and foreign currency swings than this deal size,” said Zuercher Kantonalbank analyst Andreas Venditti, who has a “market weight” rating on the stock.
But the deal underscores Credit Suisse’s efforts to beef up private banking, which tends to deliver a smoother revenue stream than investment banking.
For its part, Morgan Stanley is placing its wealth management focus on the United States, where Chief Executive James Gorman is hoping for more stable returns to compensate for the uncertain rewards from trading and investment banking.
Details of the deal – one of Credit Suisse’s first notable acquisitions since it bought out the remainder of Brazilian investment fund Hedging-Griffo in 2011 – were not disclosed. It said it expected to complete the purchase later this year.
Hometown rival UBS has also focused on private banking, but began reducing its exposure to fixed-income investment banking dramatically last October.
Credit Suisse is also trying to slash costs at the private banking operation by one billion francs by 2015 and has already folded the smaller asset management arm into that unit.
In 2011, Credit Suisse said it would integrate Clariden Leu, a private bank it owned but allowed to operate independently.
Credit Suisse says the integration has been a success, but some clients have withdrawn funds.
Credit Suisse said last month that net new assets from wealth management clients – a key indicator of future revenue – tumbled 28 percent to 2.9 billion francs in the fourth quarter.