Bank divestiture could fuel asset management M&A

Banks looking to sell off their asset management arms could provide opportunities for buy-side firms to bolster their operations in 2009, according to Richard Phillipson, a principal at investment management consultancy Investit.

At the end of 2008, banking group Credit Suisse agreed to sell parts of its Global Investors business to Aberdeen Asset Management. Further consolidation in the sector has followed, with the recent decision by French banks Société Générale and Crédit Agricole to merge their asset management units, as well as Henderson’s planned purchase of New Star.

Phillipson suggests more banks could follow Credit Suisse’s lead as they attempt to plug holes in their balance sheets or hone their focus on their core banking business. As the global financial crisis bites harder, some banks are discovering that their asset management arms are no longer the safe, reliable source of revenue they once were.

“Banks originally wanted asset management operations because they felt they had the distribution channels to sell asset management services and they believed it made more sense to sell something created in-house,” says Phillipson. “They also thought it was a relatively less volatile stream of income than their investment banking business.”