Julius Baer in Strategic Pact with Bank of China
07/23/2012| 03:33am US/Eastern
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--Julius Baer, BoC will mutually cross-refer clients
--Julius Baer expanding aggressively in Asia
--First half net profit up on cost cuts as revenue falls
(Adds detail, background throughout.)
By Anita Greil
ZURICH--Julius Baer Group AG (BAER.VX) Monday said it entered a strategic partnership with Bank of China Ltd. (3988.HK) to mutually cross-refer clients, allowing the Swiss wealth management firm to gain access to one of the world's fastest growing markets when many countries closer to home are reeling from the euro zone debt crisis.
The Zurich-based bank has been expanding aggressively in Asia over the past six years, hiring client advisors, opening a representative office in Shanghai last year and entering partnerships with local players in markets it considers strategic for growth, such as Indonesia. This focus on Asia also shows on the product side through the launch of a range of renminbi products, which it is offering to all clients worldwide after a successful roll-out in a handful of markets.
The strategic partnership with Bank of China marks a milestone in the Swiss bank's expansion in Asia.
Within the agreement, Bank of China will refer its existing and potential clients outside mainland China who require comprehensive private banking services to Julius Baer. The Swiss bank, meanwhile, will refer existing and potential clients who require banking services or specific non-private banking products and services to the Chinese bank.
"In addition, in future the partnership offers the potential for Julius Baer to gain further access to Chinese Mainland, one of the world's most important and fastest-growing wealth markets," said Julius Baer Chief Executive Boris Collardi.
Regarding possible expansion elsewhere, the bank said it was still in talks with Bank of America Corp. (>> Bank of America Corp) on buying the non-U.S. wealth management operations of Merrill Lynch, but that the outcome of these discussions was still open.
The Bank of China deal comes at a tough time for private banks.
Economic and political uncertainty, dominated by the euro zone crisis, frames the market environment and renders clients cautious, prompting them to refrain from trading in securities and currencies.
Julius Baer's operating income consequently fell 3.9% to 863.1 million Swiss francs ($877.7 million) in the six months to June 30, the Swiss bank said Monday. Cost cuts and the absence of big payments last year related to a tax dispute with Germany, meant that expenses fell at a an even steeper pace and allowed Julius Baer to report a 19% increase in net profit to CHF175.5 million.
These results were better than expected, said Teresa Nielsen, analyst in Zurich with local broker Vontobel. But she cautioned that markets will remain difficult in the second half. The partnership with Bank of China is positive but will take time to translate into business growth, she added.
Julius Baer attracted CHF5.5 billion in net new assets from clients, which came from growing markets in Asia and the Middle-East, but also from Julius Baer's local private banking business in Germany.
-Write to Anita Greil at anita.greil@dowjones.com
Corrections & Amplifications
This article was corrected at 1647 GMT because the original mispelled the name of the chief executive in the fifth paragraph. His name is Boris Collardi, not Bolris Collardi.
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