LONDON, Sept 19 (Askume) – Close Brothers Group (CBRO.L) has agreed to sell its wealth management arm Close Brothers Asset Management (CBAM) to private equity firm Oaktree Capital Management for up to 200 million pounds ($265 million).
The bank, which recently completed a strategic review aimed at raising capital, said on Thursday that the deal will increase its common equity Tier 1 capital ratio by about 100 basis points and help it deal with the uncertain business environment.
Wealth management is one of the most competitive areas of the UK financial industry, where banks compete with traditional investment firms to serve clients ranging from pension savers to billionaires.
Such businesses are heavily regulated and can be costly to run, especially following the regulator’s recent crackdown on fees and value for money.
Close said the equity value of up to £200m included a contingent deferral of £28m in the form of preference shares, valuing the deal at 27 times CBAM’s 2024 statutory operating profit after tax.
The transaction is expected to close in early 2025.
“The agreed sale represents competitive value for our shareholders and allows 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 company would look to invest in CBAM’s service capabilities and technology to build a “scaled wealth business in the UK”.
Shares closed 3.4% higher at 0706 GMT, while the FTSE 100 gained 0.5%.
Close said the company would look to make further progress on “tactical and strategic cost management initiatives” across its remaining operations.
The company reported a pre-tax profit of £45m in the first half, outperforming expectations despite some significant one-off items relating to regulatory scrutiny.
Britain’s Financial Conduct Authority said in January it would investigate consumer complaints about being charged excessive commissions when buying cars.
Analysts have initially estimated that the potential loss to the industry could be as high as £16 billion, which would make it the most expensive consumer banking scandal since the mis-selling of payment protection insurance (PPI).
($1 = 0.7561 British pounds)
