Acquisition Bolsters Julius Baer Results

By John Letzing

ZURICH--Julius Baer Group AG (BAER.VX) said Wednesday that assets under management rose 16% from the end of 2012 but cautioned investors that growth in new funds is being pressured by a crackdown on suspected tax evaders in Europe.

In an interim report released Wednesday, Julius Baer said its AUM figure rose sharply because of the acquisition of Bank of America Corp.'s (BAC) Merrill Lynch wealth-management business outside of the U.S. The acquisition, estimated to cost 860 million Swiss francs ($889 million), was announced last August and is expected to take about two years to complete.

But the Zurich-based bank, which is vying to compete with bigger rivals UBS AG (UBS) and Credit Suisse Group AG (CS) in the wealth management business, also cautioned that net inflows have been "volatile" in recent months and Europe's ongoing crackdown on suspected tax evaders will continue to pressure new money flowing into the bank.

On Tuesday, Austria and Luxembourg removed objections to a proposal for the European Union's executive body to negotiate agreements with Switzerland and other non-EU countries seeking more data on client bank accounts.

As a result of the uncertain environment, Julius Baer guided investors to the lower end of its target range for net new money this year, a closely watched measure of the funds a bank is able to garner and wring fees from. Julius Baer had set a growth rate target of between 4% and 6% for net new money in 2013.

Julius Baer said that in the four months to April 30 assets under management totaled CHF220 billion. Of that figure, roughly CHF24 billion came from the Merrill Lynch business.

The bank, which releases detailed financial results twice a year but provides interim reports like Wednesday's in between, said total client assets rose 12% in the first four months to CHF309 billion. Gross margin for the period was 98 basis points, while its cost-to-income ratio was below 70%--compared to 71.6% in the second half of last year.

Julius Baer hopes to obtain between CHF57 billion and CHF72 billion in assets under management from the Merrill Lynch business, where clients are being presented with the option of sticking with Julius Baer or opting to take their money elsewhere following the merger.

At the beginning of February, Julius Baer obtained CHF11 billion in assets under management from Merrill Lynch's business in Geneva. At the beginning of April the bank acquired roughly CHF13 billion in assets under management from the Merrill businesses in Uruguay, Chile, Luxembourg and Monaco.

Like other Swiss banks, Julius Baer is affected by aggressive efforts by tax authorities in a number of countries to track down undeclared assets. Julius Baer is one of a number of banks in Switzerland under investigation by the U.S. Justice Department as the authority tracks down wealthy Americans suspected of evading taxes.

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