The oldest private bank in Luxembourg, Banque Internationale à Luxembourg (BIL), is to be sold by its main shareholder Chinese investment firm Legend Holdings.
News broke out recently about the desire of majority shareholder of the Banque Internationale à Luxembourg (BIL), Chinese investment firm Legend Holdings, to sell its stake in the bank. Further details have now been provided, as Legend Holdings has requested American investment bank Goldman Sachs to find a buyer. RTL financial expert Claude Arend provides some clarification.
Selling stakes in a company is a standard business practice, and this is the case with Legend Holdings, which has investments in Lenovo, the food industry, venture capital, and private equity. Given its diverse portfolio, a bank does not align strategically with Legend Holdings’ interests, despite the firm purchasing 90% of Banque Internationale à Luxembourg (BIL) from Luxembourg-based Qatari holding company Precision Capital in 2017.
At the time, Legend Holdings described the investment as an “exciting long-term strategic opportunity”. However, eight years later, the strategy appears to have been unsuccessful. Rumours of a sale had been circulating within Luxembourg’s financial community long before the news broke last Friday, and now, Legend Holdings is set to exit the investment. While BIL plays a significant role in Luxembourg’s financial sector, it raises the question of why a Chinese technology giant would invest in a bank that still pales in comparison to the weight of global financial institutions.
It seems that Legend Holdings’ strategy did not deliver the expected results, as it failed to elevate BIL’s international profile or diversify the firm’s holdings (with BIL being the smallest of its domains). If the aim was to invest surplus capital abroad, that also appears to have fallen short, as the exchange rate between the Chinese Yuan (RMB) and the Euro (EUR) has remained virtually unchanged since 2017. Over the past two years, BIL has paid out €78 million in dividends, compared to the €1.5 billion investment made by Legend Holdings. Whether this under-performing investment can be salvaged will depend on finding a buyer.
The potential buyer would need to offer between €2.5 billion and €3 billion. However, financial expert Claude Arend considers this valuation excessive. With profits of €202 million in 2023, following €153 million and €135 million in the previous years, a €2.5 billion to €3 billion price tag seems unrealistic. Perhaps Goldman Sachs, tasked with finding a buyer, will have a strategy to make the deal work.
A key concern for BIL clients remains whether they should be worried. The answer is no: clients should not be concerned, as they are likely to benefit from having a banking group as the primary shareholder, rather than a Chinese technology conglomerate.
