Julius Baer acquires Bank Leumi's private banking assets

Julius Baer has purchased the international private banking assets of Israel's Bank Leumi, in the latest expansionary move by the Swiss private bank.

Under the terms of the deal, Leumi will transfer the clients of its Swiss private bank to Julius Baer, and Julius Baer will buy Leumi's private bank in Luxembourg. The two units have a combined SFr7bn ($7.8bn) in assets.

The deal follows Julius Baer's 2012 purchase of Merrill Lynch's international wealth management business, an acquisition that increased the size of the Swiss group by almost a third and significantly bolstered its international presence.

Julius Baer said the goodwill payable on the Leumi deal would be about SFr10m, but that integration and restructuring costs could bring the total cost of the deal to as much as SFr70m. The two banks have also agreed to refer clients to each other.

Leumi is the subject of an investigation by the US Department of Justice into whether it helped American clients evade taxes and said last month that it was in "advanced talks" to resolve the matter. It has set aside Shk950m ($278m) in provisions for a possible settlement.

Boris Collardi, Julius Baer's chief executive, said that the purchase of the Leumi units had been structured so that liability for a possible US fine remained with Bank Leumi group.

Julius Baer is itself also being investigated by the DoJ, although it has not yet begun negotiations over a final settlement. Mr Collardi said that it was "absolutely feasible" that a deal would be reached before the end of the year, but said that it was too early to say how much it might cost.

The integration of the Merrill assets has been the focus of much of Julius Baer's activity over the past two years, but the bank said on Monday that the process was now nearing completion. So far, the Swiss lender has taken on SFr54bn in assets from Merrill. It originally targeted between SFr57bn and SFr72bn.

Overall, the bank's assets under management stood at SFr274bn at the end of June, up 8 per cent since the beginning of the year, driven by strong inflows in emerging markets, Switzerland and Germany.

In the six months to the end of June, the bank made a net profit of SFr178.9m, or SFr0.82 a share, up from SFr114.3m in the same period a year earlier, thanks to a reduction in costs associated with the Merrill acquisition.

Mr Collardi said he was "very pleased" with the results, noting that the "substantial further asset growth of the group and the excellent net new money result led to an all-time high in assets under management".

Investors reacted positively to the news. Shares were up 7.2 per cent at SFr39.19 in mid afternoon trading in Zurich. Analysts at Citigroup said the results "should support mid-single digit upgrades in consensus estimates".

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