In order to further expand its U.S. wealth management
Canadian Imperial Bank of Commerce
) announced a deal to acquire Atlantic Trust Private Wealth
). The company will be paying $210 million, while adding nearly
$20 billion in assets.
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Atlantic Trust offers integrated wealth management solutions
through a team of 235 employees. With this acquisition, CIBC will
get exposure to the high-networth U.S. private wealth market.
The deal, still subject to regulatory approvals, is expected to
close by the end of this year. Upon completion, the deal will be
accretive to CIBC's earnings in fiscal 2014. However, it is
anticipated to lower the company's Basel III tier 1 equity ratio
by about 20 basis points from 12.4% as of Jan 31, 2013.
For Invesco, the divestiture of Atlantic Trust is expected to
lower net revenues by about $115 million on an annualized basis,
while operating expenses would decline by approximately 85
million. Hence, the overall impact on earnings per share on an
annualized basis would be 5 cents. Yet, Invesco intends to use
the money raised to buyback shares, thereby somewhat mitigating
the dilution of earnings by 3 cents.
CIBC continues to witness a massive surge in demand for wealth
management services and is striving hard to improve the
performance of its private-wealth business. In the fiscal first
quarter (ended Jan 31), the unit contributed roughly 7% of Wealth
Management's total revenue.
Additionally, CIBC has been augmenting its wealth management
operations inorganically. In 2012, the company acquired private
wealth management business of MFS McLean Budden, a subsidiary of
Sun Life Financial Inc.
). Further, in 2011, the company announced its decision to buy a
41% equity stake in American Century Investments, a major U.S.
asset management company.
Apart from CIBC, many other Canadian banks are trying to heighten
their wealth management operations. In 2012,
Royal Bank of Canada
) announced a deal to buy the Latin American, Caribbean and
African private banking business of Coutts - the wealth division
of Royal Bank of Scotland Group.
We believe that CIBC's recent acquisition will enhance revenue
generation from its private-wealth business. Further, amid the
gloomy global economic environment, the company will be able to
stabilize its financials.
Currently, CIBC retains a Zacks Rank #4 (Sell).