HSBC Holdings Plc (HSBA) (HSBA) received an approach from a unit of Safra Group to buy the Monaco private bank the Safra family once owned, and is also considering selling parts of its Swiss private bank, three people with knowledge of the situation said.
The Monaco unit may be valued at $600 million to $700 million, one of the people said, asking not to be identified as the details are private. HSBC, Europe’s largest bank, has also made informal approaches to potential buyers for parts of its Swiss private bank over the past month, one of the people said. No final decision has been made on either unit, the people said.
HSBC has attracted scrutiny from governments over its operations in low-tax jurisdictions, with U.K. authorities saying last year that they were acting on information about accounts at the bank’s Geneva office. The London-based company bought the private-bank businesses in in 1999 through its $9.85 billion acquisition of Edmond J. Safra’s Republic New York Corp. and Safra Republic Holdings SA. Safra died in a Monaco fire later that year.
“This is mainly about banks being concerned about their presence in markets where cross-border, offshore activity took place and is under scrutiny,” said Christopher Wheeler, an analyst at Mediobanca SpA in London. “That is why HSBC now seems to want to exit Monaco and parts of its Swiss business that it feels carries risk.”
A spokesman for HSBC in Zurich declined to comment. HSBC, which is closing or selling 52 businesses to revive earnings, said in May that the Monaco private bank received “unsolicited expressions of interest.”
“It is the policy of Safra to not comment on questions of this type,” Robert Siegfried, a New York-based spokesman for the Safra Group, said today in an e-mailed response to questions about the HSBC assets from Bloomberg News.
Edmond Safra’s widow, Lily Safra, is one of HSBC’s Monaco private-banking clients, one of the people with knowledge of the situation said. Edmond Safra was born in Lebanon to a banking family tracing its trading roots to the Ottoman Empire, and Safra Group is controlled by his Brazil-based relatives. Safra’s male nurse was sentenced in 2003 to 10 years in prison for setting the fire that killed the banker at the age of 67.
HSBC may “significantly reduce” its business in tax havens, Chairman Douglas Flint said at the bank’s annual meeting on May 24. Herve Falciani, a former HSBC software technician in Geneva accused of stealing data by the bank, has said the company’s Swiss private bank was an “open door” for money laundering because managers failed to exercise controls. Spain has refused to extradite Falciani to Switzerland.
J. Safra Sarasin Holding Ltd., which manages client assets valued at 130 billion Swiss francs ($139 billion), plans to become one of the world’s top 20 private banks, board member Jacob Safra said in May. Safra Group agreed in November 2011 to pay more than 1 billion francs for Rabobank Groep’s controlling stake in Bank Sarasin.
HSBC Chief Executive Officer Stuart Gulliver said on May 15 that the company won’t exit Swiss private banking.
“We need to have to reshape certain parts of it,’ Gulliver said. Some units “acquired from Republic don’t fit with effectively a private bank that needs to be emerging market-focused and focused alongside our commercial banking business.”
HSBC fell 1.1 percent to 692 pence at 1:24 p.m. in London trading, valuing the bank at 129 billion pounds ($201 billion).
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