Boston Private share price jumps on securities buyback

Shares of Boston Private Financial Holdings Inc. jumped more than 11% Tuesday morning after the company said it repurchased $44.5 million of publicly traded convertible-trust preferred securities at a 44% discount to their issuance price in 2004.
Boston Private (BPFH), which in recent months announced the sale of three of its banking, wealth advisory and asset management affiliates in a capital-raising quest, said in a filing with the Securities and Exchange Commission on Monday night that it paid $24.9 million for the securities and expects an after-tax gain of about $10.8 million.
Retirement of the securities significantly boosts the credit-wounded company’s tangible common equity by 20 to 25 basis points, chief financial officer David Kaye said at a banking conference in New York on Tuesday.
Boston Private, which a year ago borrowed $154 million from the government as part of the Troubled Asset Relief Program, also has undergone a core shift in its previous roll-up strategy of developing a national network of private-banking, money management and wealth advisory firm clusters for high-net-worth individuals, Mr. Kaye said. It neither wants to be in all regions nor to have all three businesses in each operating region.
“Our focus is on accelerating the growth of our existing affiliates,” he said, contrasting the strategy with its plan a year or two ago of building clusters of banking, asset management and wealth management affiliates in new regions nationwide. “We are not looking at building a footprint in new regions.”
Boston Private, which has 10 affiliates in New England, New York, California and the Pacific Northwest with a total of about $18 billion of assets under management, this quarter is selling Westfield Capital Management Co. LP, its largest asset management affiliate, back to its executives for a one-time book gain of $45 million. It will continue to book 12.5% of Westfield’s revenue for eight more years.
Earlier this year, it sold back to their managements Gibraltar Private Bank and Trust, which accounted for 40% of the company’s problem loans at a book loss of $35 million; Rinet Co. LLC, a wealth manager with less than $1 billion in assets under management; and Sand Hill Advisors LLC, which has about $1 billion of client assets. “The affiliates we divested really contributed nothing to our growth,” he said.
The Gibraltar sale was the most significant since it helped staunch real estate losses that had badly damaged Boston Private’s capital ratios and its share price, while the other sales generated capital to invest in remaining affiliates that have greater growth potential, Mr. Kaye said.
Boston Private generated 67% of its $78 million in third-quarter revenue and a significant amount of its profit from its private banks, he said, but is keen on retaining its four wealth advisory and two investment management affiliates because their fee-based business generate consistent capital for its four private banks. The banks oversee $3.4 billion of assets under management, compared with $6.9 billion for the wealth advisers and $7 billion for the investment managers. Average operating margin over the last eight quarters was 34% at the banks, 31% at the wealth advisers and 20% at the investment mangers, excluding tax, loan loss provisions, impaired loans and one-time items.
The bank’s value-based investment managers, with the exception of the soon-to-be divested Westfield, suffered outflows of client assets in four of the last five quarters, while its wealth advisers — including KLS Professional Advisors Group LLC and Bingham Osborn & Scarborough LLC — have enjoyed inflows in that period, Mr. Kaye said. The growth hasn’t been large, but the wealth managers are “slower, steadier accumulators of assets,” he said.

Related Topics: Wealth Management