Banque internationale à Luxembourg (Bil) “reaffirms its long-term vision as a universal bank,” headlines the press release announcing, on Thursday 24 April, . As if in response to those who see Bil refocussing on wealth management as a result of a change of ownership.
Although the facts may eventually disprove it, the hypothesis of a forthcoming change of hands is circulating insistently about the doyenne of the national banking sector. It would see the Chinese group Legend Holdings, which has held 90% of its capital since 2017, . This is fuelling speculation about the future of the institution founded in 1856. The bank employs around 1,900 staff in Luxembourg, as well as more than 100 additional staff in Switzerland and China.
Amongst the scenarios being considered, that of a complete refocusing on wealth management is attracting attention. This business segment, which includes wealth management services for domestic and international clients from Luxembourg and Switzerland, is often seen as the most attractive part of Bil's business for a potential buyer. For the latter, turning Banque internationale à Luxembourg into a specialist wealth management player would offer several advantages: a local market that is still buoyant despite competition, an established image and recognised expertise.
Buying Bil could be a strategic entry point for a foreign bank.
“Buying Bil could be a strategic entry point for a foreign bank wishing to establish itself in Luxembourg,” confirms economist Bruno Colmant. For Colmant, a former director of ING Luxembourg, the Brussels Stock Exchange and Degroof Petercam, the Luxembourg financial centre remains solidly positioned in wealth management. “It will remain so because Luxembourg enjoys a high degree of institutional stability. In addition, well-structured economies of scale are already in place.”
Bil’s 2024 results nevertheless raise questions about the performance of its wealth management business. According to a presentation for investors, current operating income fell by 14% between 2023 and 2024, from €242m to €209m. Colmant was surprised by this significant drop: “In wealth management, whether the markets are rising or falling, there is generally a rotation of portfolios. Fee income therefore normally remains stable.” Does this decline reflect a loss of assets in this segment? Asked for an explanation, Bil did not respond.
In its 2024 annual report, Bil says it has intensified its focus on entrepreneurial clients in wealth management. “As economic growth remained sluggish and markets volatile throughout 2024, Bil’s wealth management teams in Luxembourg, Switzerland and China focussed on supporting existing clients. The service offering was simplified to be more efficient and ease development. Bil wealth management teams were fully focussed on prospection and business development, with promising results,” writes the establishment.
Hong Kong office closed
“In parallel, the bank conducted a strategic review of its wealth management businesses to ensure that its organisation and commercial drive are fully aligned with its strategy. As a result, the bank decided to concentrate its resources on a limited number of core markets to support customers where the bank can bring more value, while optimising its set-up on others. In France, Bil initiated the process of setting up a commercial office in Paris, with an opening planned in 2025. Due to exacerbated competition and a slowdown of the economy, the bank , Bil Wealth Management Limited.”
“This is a completely coherent choice,” comments Colmant. “Asian markets are remote and highly competitive, and it is extremely difficult to achieve critical mass. This refocusing therefore seems to me to be particularly judicious.”
Nevertheless, the bank insists in its report: “Bil is fully committed to its Chinese clients and will continue to serve them with dedicated teams from its two wealth management hubs located in Luxembourg and Switzerland. Bil’s representative office in Beijing remains fully operational.”
A critical voice suggests that only private banking and asset management are likely to attract potential buyers. A global sale therefore seems less likely than a segmented sale. One of Bil’s competitors agrees, suggesting that Legend Holdings will have to sell its businesses separately, with the price circulating being considered too high (there has been talk of €2.5bn to €3bn) given the quality of, for example, the bank’s asset servicing.
Towards a tighter banking landscape
A buyer could thus seek to isolate wealth management from the rest of the banking business. But even if such an operation maximised the value of the portfolio, it would raise some important questions: what would become of retail banking? Could a local player take over this business? Should a national solution be considered?
A Bil exit from the retail banking market would further disrupt an already changing Luxembourg banking landscape. The marked an initial reduction in the number of players. If Bil withdraws, only a few large players--Spuerkeess, BGL BNP Paribas, Raiffeisen, Post Finance--and a few small banks will remain.
This concentration raises a key question: how many players are needed to ensure real competition in retail banking in Luxembourg? Some believe that two or three players could be enough for this market, in a context where the costs of digitalisation are putting profitability to the test. This is a debate that could ultimately raise questions for the competition authorities.
A risky and complex split
While the refocusing on wealth management is attractive, there are several reasons for maintaining Bil as a universal bank. The integrated model offers essential synergies, particularly in financing. The retail network provides a valuable deposit base to support lending activities. Historically, Bil has had strong deposit positions. This enables it to finance its lending without necessarily drawing on central bank liquidity.
From a technical point of view, the separation of activities would be far from trivial. The central functions, and in particular the IT systems, are highly integrated. Fragmenting a single IT system to create several independent ones would represent a colossal undertaking, both in terms of cost and complexity. The technological infrastructure, which is often invisible from the outside, is a strategic node in any demerger operation.
A Bil insider recalls a lesson from the past: the demerger of ABN Amro in 2007. At the time, the Santander, RBS and Fortis groups had acquired the Dutch bank with the intention of splitting it into three entities. The operation, considered rational on paper, turned out to be disastrous in practice. “It was the view of consultants, not professionals. It ended in disaster for the bank and its buyers,” the person warns.
Moral of the story: for Bil, any radical transformation will have to be weighed with caution.
This article was originally published in .