Close Brothers Group has agreed to sell its wealth management unit, Close Brothers Asset Management (CBAM), to private equity firm Oaktree Capital Management for up to 200 million pounds ($265 million).
The lender, fresh from a strategic review aimed at bolstering its capital, said on Thursday the deal would boost its common equity tier 1 capital ratio by about 100 basis points and help it manage an uncertain business environment.
Wealth management is one of the most competitive segments of Britain’s financial industry, with banks jostling with traditional investment firms to serve clients from pension savers to billionaires.
Such businesses are tightly regulated and can be costly to run, particularly following a recent crackdown by watchdogs on fees and value for money.
The equity value of up to 200 million pounds includes a contingent, deferred 28 million pounds in the form of preference shares, Close said, adding the deal equated to 27 times CBAM’s 2024 post-tax statutory operating profit.
The transaction is expected to complete in early 2025.
“The agreed sale represents competitive value for our shareholders, allowing us to simplify the group and focus on our core lending business,” Close Chairman Mike Biggs said in a statement.
Oaktree Managing Director Federico Alvarez-Demalde said his firm would look to invest in CBAM’s service capabilities and technology to build “a UK wealth business of scale”.
Close shares were up 3.4% at 0706 GMT, against a 0.5% rise in the FTSE 100.
Close said it would look to make further progress in “tactical and strategic cost management initiatives” in its remaining business.
The company also reported first-half pretax profit of 45 million pounds, beating expectations despite some significant one-off items related to regulatory reviews.
Britain’s Financial Conduct Authority said in January it would look into consumer complaints about overcharging on commission when buying a car.
Early analyst estimates put the sector’s total possible compensation bill as high as 16 billion pounds, which would make it the costliest consumer banking scandal since the faulty sales of payment protection insurance (PPI).
Source: Reuters.com