Boston Private to cut costs, sell advisory business

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Boston Private Financial Holdings is cutting $11 million in annual expenses as part of an efficiency effort.

The $8 billion-asset company incurred $5.8 million in one-time charges during the third quarter to cover severance and other compensation-related expenses tied to the initiative. Management said during a conference call to discuss quarterly results that the savings should kick in next year.

“The primary motive for the expense reduction was simply to better equip us to generate target returns in an increasingly competitive environment,” Clayton Deutsche, Boston Private’s CEO, said during the call.

“Every participant in our sector is experiencing a deposit-driven, rate driven [net interest margin] squeeze,” Deutsche added. “Our return performance in the second quarter was unacceptable, so we worked very hard on the expense side of the ledger.”

The company's net interest margin compressed by 9 basis points in the third quarter from a year earlier, to 2.93%

Boston Private’s executives offered scant details on the cuts, though salary expenses fell 13% in the third quarter from a year earlier, to $38.9 million.

Third-quarter earnings fell 9%, to $18 million. Excluding the restructuring charges, profit would have increased by 20%.

Boston Private also announced that it will sell its ownership interest in wealth adviser Bingham, Osborn & Scarborough. Boston Private said the advisory firm would be owned by its management team and Kudu Investment Management in New York; the deal is set to close in the fourth quarter.

Boston Private will receive about $21 million of cash at closing and an eight-year revenue share. The company said it expects the financial impact of the sale to result in an $18 million pretax gain and a related tax expense of $3 million to $4 million.

The sale will increase the company’s Tier 1 common equity by about $33 million.

The move is the second notable divestiture from Boston Private this year. In April it sold its ownership interest in Anchor Capital Advisors.

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