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EFG International Expects To Slash BSI Purchase Price; BSI Suffers Outflows Amid 1MDB Scandal
Tom Burroughes
11 August 2016
, the Swiss bank which has bought BSI from its Brazilian parent, BTG Pactual, said it expects its purchase price of the Switzerland-headquartered bank to be SFr140 million ($143 million) less than originally planned, at a time when BSI has been hit by regulatory action in Singapore. The Zurich-listed firm yesterday published updated financial data on BSI, showing a net outflow of SFr9.6 billion from BSI in the first six months of 2016, much of which was caused by BSI falling foul of Singapore regulators probing anti-money laundering lapses. In May, the Monetary Authority of Singapore said it was moving to revoke the merchant banking licence of BSI Singapore, part of Switzerland-headquartered BSI, due to serious control lapses and misconduct around money laundering, in connection with payments involving 1MDB, the Malaysian state-controlled organisation which is the subject of major corruption allegations. Revenue-generating assets under management at 30 June were SFr76.0 billion (versus SFr87.7 billion as at the end of 2015), reflecting the outflows, a decline in outstanding loans, and currency market effects, the statement yesterday said. Underlying operating income was SFr341.5 million, down from SFr373.0 million in the second half of last year, while return on AuM was marginally up at 83 bps (vs. 82 bps in 2H15). BSI's underlying profit was SFr34.4 million, from SFr36.5 million in the second half of last year. On an IFRS basis, there was a net loss of SFr18.3 million, against a net profit of SFr 28.1 million in the previous half-year period, which EFG said reflected the "significant exceptional items that affected BSI in the first half", mainly related, among others, to disgorgement of profit (in relation to BSI Singapore) as imposed by FINMA, the Swiss regulator, a fine from the Singapore regulator, the disposal of 49 per cent of B-Source, termination cost related to the change of the IT platform and retention costs. Based on the 30 June 2016 financials of BSI, the estimated purchase price adjustment would have been a reduction of the consideration to be paid by EFG International by SFr140 million (in addition to previously announced adjustments). The acquisition is expected to be complete by the end of this year, EFG said.
As previously indicated, the price to be paid by EFG International for BSI could be adjusted for the changes in IFRS tangible book value and net new money differences between 30 November 2015 and closing, if such difference is higher than SFr76. 96 billion multiplied by an agreed multiple (100 to 150 bps).