Wealth management curbs private bank M&A

By Andrew Hurst

GENEVA (Reuters) - A boom in global wealth management has put a brake on consolidation of the highly fragmented private banking industry as the cost of acquiring franchises becomes prohibitively high.

In a business where even the biggest wealth managers such as Switzerland's UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) and Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) of the United States each hold only 2 to 4 percent of the global market, acquisitions can provide a path to rapid growth.

"The business is extremely fragmented ... insurers, brokerages and private bankers are all going after the same dollar," said Thomas Kalaris, chief executive of wealth management at Britain's Barclays (BARC.L: Quote, Profile, Research, Stock Buzz).

"A certain scale is important. You don't need to be the biggest. It comes down to scale to be able to compete for people," Kalaris told the Reuters' Wealth Management Summit.

It may take a cyclical downswing in financial markets to push smaller players to merge with each other or sell out to bigger wealth managers.

"Results (in wealth management) in the past two years have been excellent and have pushed prices higher," Patrick du Saint, head of BNP Paribas's (BNPP.PA: Quote, Profile, Research, Stock Buzz) private banking business in Switzerland, told the summit.

"We all know the private banking business is cyclical. I think consolidation will be helped by less good markets than we have today."

BURDEN OF REGULATION  Continued...