Julius Baer first-half profit slides following USA charge

Exports from Switzerland rose by a real 5.9 percent in June to 17.912 billion Swiss francs, the Federal Customs Office said on Tuesday.

ZURICH-Julius Baer Group AG said on Monday that the Swiss bank’s stockpile of managed assets was slightly depleted during the first half of the year because of the sharply strengthened Swiss franc.

Julius Baer remains one of a handful of Swiss banks under Justice Department investigation for allegedly aiding tax evasion among American clients, by providing undeclared accounts once hidden by Swiss bank secrecy laws. Remaining assets have yet to be transferred to Julius Baer from the Merrill business in India, the bank said.

Julius Baer announced last month it set aside $350 million in the first half for an eventual settlement with the US Justice Department to resolve a four-year probe of offshore accounts for Americans.

“The financial results were impacted by the recently announced USA provision, and Julius Baer will continue to work toward closing this regrettable legacy issue as soon as possible”, the Zurich-based bank’s Chief Executive Boris Collardi said in a statement.

Adjusted operating expenses jumped 45 per cent in the first half of the year, Julius Baer said, due partly to the provision made last month to help the bank settle the U.S. tax-related probe. Of that total, 56 billion francs came from the bank’s purchase of Bank of America Corp.’s Merrill Lynch wealth-management business outside of the US.

Julius Baer also said it acquired a 40 percent stake in NSC Asesores, the largest independent financial advisory firm in Mexico.

Julius Baer has completed about nine deals over the past decade, spanning Swiss private banking, assets of banks exiting offshore locations and stakes in financial services companies in Latin America. Mr. Collardi said the bank has yet to enter “the final stages” of hammering out a settlement.

London is also a target market. Merrill bankers and their clients have had the option to take their business elsewhere. His decision to appoint Hector Sants, the former head of the United Kingdom financial regulator, as chairman of Julius Baer worldwide Ltd. from July 1 in London, may indicate a desire to schmooze local authorities into backing any future purchases. Mr Collardi has repeatedly said he is a buyer, not a seller, saying the company would be too expensive a purchase for many of its rivals.

The bank’s market capitalization is more than 4 percent of assets under management. That is nearly double the average private banking deal multiple of 2.1% this year, says London-based consultancy Scorpio Partnership.

Julius Baer is “a predator, not prey”, said Michael Kunz, an analyst at Zuercher Kantonalbank in Zurich.

CEO Boris Collardi said he’s “very hopeful” the tax dispute will be closed this year. Royal Bank of Scotland Group and Morgan Stanley have also retreated. “But regularly doing acquisitions profitably?”