Julius Baer looks ahead after BOC tie-up

Swiss private bank Julius Baer has entered into a strategic partnership with Bank of China (BOC) in which they will mutually cross-refer clients and undertake joint marketing.

The deal, unveiled yesterday as Julius Baer announced its half-yearly results, will also see the firm take over Bank of China’s Swiss operation, which has less than SFr1 billion in AUM. Financial details of the transaction were not disclosed.

BOC founded the business in Geneva in December 2008 for international Chinese clients. Integration is expected to be completed within the next few months.

A spokesman for Julius Baer in Zurich tells AsianInvestor this deal is the first step as the firm seeks to develop a longer term business proposition in mainland China, which he described as the world’s most important and fastest growing wealth market.

“At this point we are only present in mainland China through our small representative office in Shanghai,” he says. “Through this move we hope to make another move closer to a market which at this point in time is still difficult and closed.”

He notes that BOC has 19 dedicated private banking outlets in China and suggests that Julius Baer will offer support in areas such as succession planning.

Under the terms of the agreement, Julius Baer becomes a preferred partner for BOC clients seeking international private banking services outside the mainland, while the Swiss firm will refer international clients who have banking needs in China to BOC.

The two partners also envisage cooperation in product distribution and financial market research as well as joint initiatives such as investment conferences.

In a statement, Boris Collardi, chief executive of the Julius Baer Group, pointed to opportunities that the collaboration would give the firm in gaining further access to the Chinese mainland.

Li Lihui, vice-chairman and president of BOC, was quoted as saying that the bank’s international private banking clients had become much more demanding in recent years and suggested that Julius Baer would help to service the needs of its clients.

As at the end of June, Julius Baer had SFr179 billion in AUM, a 5% increase since the end of 2011, according to its latest set of results. It saw SFr5.5 billion in net new money in the first half of this year.

Including assets under custody it now has SFr269 billion in total client assets (+4% in the first half), with a BIS tier-1 ratio of 21.4%.

However, its operating income declined by 4% to SFr863 million and it saw its cost-income ratio increase to 70.4%, from 68.4% at the end of last year. Pre-tax profitability rose 15% over the first half to SFr266 million.

Collardi pointed to economic and political uncertainty dominated by the eurozone crisis that continues to frame the market environment. “Against this background clients maintained their cautious investment stance, leading to relatively restrained transaction and trading activity.”

Julius Baer has 3,649 staff globally, including 801 relationship managers. It is still in discussion with Bank of America over the potential acquisition of Merrill Lynch’s international (non-US) wealth management business.

It comes after Julius Baer failed in its bid to acquire Rabobank’s majority shareholding in Sarasin, a stake eventually bought by Brazil-based Safra Group earlier this year.