NatWest rates swoop for wealth management firm Quilter which would be its biggest takeover since the financial crisis
Review: Alison Rose of NatWest
NatWest is in the early stages of considering a bid for wealth management firm Quilter, according to city sources.
A takeover would be the biggest for the British lender since the bank became taxpayer-owned at the height of the financial crisis with a £46billion bailout.
Private equity firms such as CVC, Bain Capital and BC Partners have also shown interest in the FTSE250 group in recent weeks, the sources said.
Quilter, worth £1.4billion, is believed to be one of many wealth management companies that lack the scale and investment to compete with big players and banks.
Its shares have fallen by a third this year to their lowest level since its IPO in 2018 following the dissolution of its parent company, financial services company Old Mutual.
Quilter is on NatWest’s list of potential targets, two sources said. The bank, which is partly government-owned, is looking to expand its wealth management business.
He already owns Coutts whose clients include the Queen, members of the aristocracy and wealthy city professionals.
A deal to buy Quilter would extend these services to ‘affluent’ middle-class households with more than £100,000 of spare cash to invest, a source has said.
In June, chief executive Alison Rose said NatWest had “significant excess capital” and would consider a merger and acquisition that could generate “compelling shareholder value.”
In October last year, NatWest bought children’s savings app Rooster Money. Earlier this year he was reportedly interested in buying wealth management firm Tilney Smith & Williamson.
A takeover of Quilter would be the latest in a series of corporate deals in the asset management industry.
US group Raymond James paid £279million for Charles Stanley last year.
London-based Brewin Dolphin agreed to be taken over by Royal Bank of Canada in April for £1.6bn. Aviva bought Succession Wealth Management for £385million in March.
NatWest reportedly considered targeting other financial services companies, alongside Quilter. It’s unclear how far along the plans are at this time.
However, sources said private equity firms are actively considering options, although plans are still in their infancy.
These companies rely heavily on borrowing to fuel acquisitions, and lenders have reduced the amount of debt they’re willing to issue to fund such deals since March, when Russia invaded Ukraine.
A source said the arrival of a new prime minister could bring more certainty – providing a window of opportunity in September or October.
He said the cost of debt is high right now, which is stifling enthusiasm for deals between private equity firms.
“If you want to borrow money for equity, you have to be very confident in where the business is going,” he added.
NatWest said last week that operating profit reached £1.5bn in the second quarter of June, a 20% increase on a year earlier.
This was ahead of analysts’ expectations of £1 billion. Performance was boosted by rising interest rates and mortgages.
Quilter’s assets under management were £107 billion in the first quarter of this year, down 4% from the previous quarter.
Quilter, NatWest, Bain Capital, CVC and BC Partners declined to comment.