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  1. Wealth
April 22, 2009

Banks selling prime assets to shore up balances

By Spear's

Banks are lining up to dispose of prime assets in their struggle to replenish capital, strengthen stressed balance sheets and attempt to avoid in some cases becoming too deeply reliant on government bailout money.

Banks are lining up to dispose of prime assets in their struggle to replenish capital, strengthen stressed balance sheets and attempt to avoid in some cases becoming too deeply reliant on government bailout money.

Latest asset sales by Britain’s Barclays and Royal Bank of Scotland signal that a reluctance to sell assets at low prices may have shifted, with some banks tacitly admitting that “self-help” is a preferable option to taxpayer cash, and selling non-core assets may be the best route to take.

In many cases, assets being offloaded include wealth management businesses, seen generally as marketable operations at a time when other areas of banking are still no-go areas and unattractive to buyers. Crucially, wealth management generally remains profitable when much of banking still makes losses or produces marginal earnings, in areas ranging from investment banking to credit cards.

Currently, UBS is the among the most aggressive of the sellers, undertaking a major dismantling of its business to raise money and also reduce risk. This is demonstrated by its latest sale – UBS Pactal in Brazil for $2.5 billion. Originally acquired in 2006, the unit will be sold back to its original owners and will result in a small loss.

For further details, visit thewealthnet

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