BSI: «Perfect Fit» for Julius Baer?


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BSI private bank may be available because of liquidity problems at owner BTG Pactual. Rumors have it that Julius Baer is interested in buying the bank. Seven reasons why.

1. Dash to Asia

Asia is the second home market of Julius Baer – the Zurich-based private bank made that claim a couple of years ago, launching its bid to establish a strong foothold in the boom market. BSI is already there, with 320 employees in Hong Kong and Singapore. BSI Asia boss Hanspeter Brunner told not long ago that he expected to double assets under management from a current 15 billion francs over the coming couple of years.

2. Italy as Private Banking Hub

Julius Baer only just raised its stake in Kairos asset manager to 80 percent from 20 percent, in recognition of the fact that Italy is the third-largest private banking hub in the eurozone. BSI already manages 18 billion francs in that market, with a strong customer base and a branch in Milan.

3. Clean-Up at BSI Accomplished

BSI underwent the necessary clean-up when BTG agreed to acquire the bank. It was the first among the bigger Swiss banks to solve the simmering tax dispute with the U.S. and in 2013 it launched a cost-cutting program with the loss of 160 jobs.

4. The Human Touch

Mergers and acquisitions are notoriously difficult because human beings are involved with large egos that may get hurt. Sarasin Chief Executive Joachim Straehle for example fought hard against the sale of «his» bank to Julius Baer. Baer has quite a large number of former Credit Suisse managers, which could prove to be a stumbling block for some potential takeovers.

The people working at BSI come from a varied background and have proven their loyalty and might thus be a good fit for Baer.

5. The Necessity to Buy

With the completion of the acquisition of the international private banking unit of Bank of America/Merrill Lynch, Julius Baer is free for a new takeover bid. The third-quarter result showed that net new money was at the lower end of expectations in the first 10 months of the year because of the strong franc and as customers in France and Italy declared their assets to the respective tax authorities.

Should Baer miss its own targets, the share price will likely drop and owners might be temped to exert pressure on the bank to use the money available for takeovers, said to amount to 600 million francs.

6. Pressure on BTG

BTG Pactual has liquidity problems and may need to sell. This of course would play into the hands of a potential buyer. Julius Baer didn't comment on the speculation surrounding a potential takeover bid. But Swiss regulator Finma probably would prefer a Swiss buyer for BSI.

7. Bidding War

The rumors circulating in the market suggest that strong foreign bidders might want to snap up the bank. Italian bank Intesa Sanpaolo and Chinese institutes have been linked with BSI. Intesa Sanpaolo, Italy's second-biggest bank, sees potential in the Swiss market. It might be tempted to buy in the Italian-speaking part of the country, making the integration easier. It is known to have the money to make an attempt. The more important for Julius Baer to act swiftly.


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