NatWest Group has agreed to buy one of Britain’s largest wealth managers, Evelyn Partners, for 2.7 billion pounds ($3.68 billion), including debt, in a bid to expand its wealth management business, the British lender said on Monday.
NatWest is following rivals such as HSBC and Lloyds in boosting wealth management offerings in recent years, as British lenders increasingly target the fee-based business to offset an expected decline in interest income as central bank rates fall.
The deal, NatWest’s biggest since its 2008 state bailout at the height of the global financial crisis, also sees the bank expanding on its strategy of core domestic retail and commercial banking businesses. That has marked a pivot from the lender once known as RBS, which in the build up to the crisis grew to a sprawling global empire with a balance sheet of 2.4 trillion pounds, twice the size of Britain’s economic output at the time.
The Evelyn combination more than doubles NatWest’s total assets under management and administration to 127 billion pounds, up from 56 billion pounds for the bank alone at the end of September.
NatWest said it expects the deal to generate about 100 million pounds in annual cost savings and announced a 750 million pound share buyback.
It also creates Britain’s largest private banking and wealth management business and transforms NatWest Group’s savings and investment offering for its 20 million customers, the British lender said.
NatWest shares fell 4.5%, as analysts at Jefferies said the deal made strategic sense but came at a hefty valuation that could hit earnings per share by 2% through to 2028 compared to if the bank had not done the deal.
TRANSFORMATIONAL DEAL FOR NATWEST
Evelyn’s private equity shareholders, Permira and Warburg Pincus, kicked off a sale of the wealth manager last year, which also drew interest from Barclays, Lloyds, and the Royal Bank of Canada, Reuters reported.
“We are somewhat surprised that NWG appear to have come out on top, given how tightly the CEO holds the bank’s purse strings,” RBC Capital Markets analyst Benjamin Toms said in a note.
“Although we consider this to be a bolt on transaction, it would be transformational, filling the gap NWG has in its affluent wealth offering.”
Permira has owned Evelyn Partners, formerly known as Tilney Smith & Williamson, since 2014, funding its growth into a wealth manager overseeing 63 billion pounds in client assets.
The transaction will be funded from existing resources and is expected to reduce NatWest’s core equity tier 1 ratio by about 130 basis points, the bank said.
($1 = 0.7344 pounds)
(Reporting by Prerna Bedi and Raechel Thankam Job in Bengaluru and Lawrence White in London)
