Swiss bank J.Baer says tax clampdowns slow money flows

By Reuters Staff
November 10, 2009

By Jason Rhodes
ZURICH, Nov 10 (Reuters) – Swiss private bank Julius Baer Group AG said money from wealthy clients had been flowing into the group at a slower pace since mid-year due to international tax clampdowns.

Baer, which split its core private bank and asset management operations into two separately listed companies last month, also said on Tuesday it was seeking more acquisitions following its purchase of ING’s Swiss private banking assets.

“We are still open to acquisitions. In principle, the bigger the better,” said spokesman Jan Bielinski, adding Baer was looking in Asia, Switzerland and the rest of Europe.

Baer has an estimated war chest of $500 million but Bielinski said the bank could tap the market for more.

Switzerland has faced a barrage of attacks over its tax- haven status, prompting the country to relax its cherished bank secrecy to comply with international rules.

Germany, France, Italy and the United States have all launched action over their citizens stashing savings in secretive Swiss accounts.

The regulatory environment in some European countries was leading to some clients relocating assets, Julius Baer, Switzerland’s third-biggest bank, said without providing figures.

“For sure, we’ll be able to recapture some of the outflows through our onshore operations,” said Baer spokesman Jan Bielinski.

Baer confirmed its exit from the United States and Bielinski said this had started some time ago and was also to do with tighter regulation.

Analysts Derek De Vries and Marc Brehm at Bank of America/Merrill Lynch said: “Julius Baer was slightly more cautious than we expected on net new money.”

GROWTH IN ASIA
The analysts said the fact that clients are repatriating assets for tax reasons was “a bit troubling given that Julius Baer doesn’t have much of an onshore presence in Europe to capture assets”.

Shares in Julius Baer fell 0.7 percent to 40.28 Swiss francs by 1051 GMT, underperforming a 0.9 percent rise in the DJ Stoxx European bank index. Julius Baer listed at 40.12 Swiss francs on Oct. 1 after the spinoff of GAM, before peaking at 43.00 francs three weeks later.

Baer said its assets under management (AuM), boosted by the recovery of markets, rose 17 percent in the first 10 months of 2009 to 150 billion Swiss francs ($148.7 billion) even as some clients, rattled by tax fears, moved money.

A growing number of client advisers boosted inflows of client money, which were still positive in all regions but came mainly from growth markets such as Asia, Baer said.

“Julius Baer is still hiring new client relationship managers which should support net new money going forward,” said Vontobel analyst Tobias Bruetsch.

Bigger domestic rival UBS AG said it continued to leak billions in client assets in the third quarter, as it struggled to rebuild its reputation that was damaged by a bitter U.S. tax row. Credit Suisse said money inflows increased to its private bank.

Baer said it had a strong capital base with a Tier 1 ratio above 19 percent, including $300 million proceeds from the listing of U.S. asset management arm Artio Investors Inc.

Taking into account the $350 million Baer was paying for the ING assets, Tier 1 would be around 16 percent, said Bielinski, well above its goal of 12 percent.

“If you have the right (acquisition) target, you can also go to the market. It’s not just a matter of how much money is left over,” said Bielinski.”

The ING deal should close in the first quarter of 2010 and integration had already begun, Baer said.

(Editing by Erica Billingham and David Holmes) ($1=1.009 Swiss Franc)
((jason.rhodes@thomsonreuters.com; +41 58 306 7312; Reuters Messaging: jason.rhodes.reuters.com@reuters.com))

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