Oct. 7 (Bloomberg) -- Julius Baer Group Ltd., the 120-year- old Swiss private bank, agreed to buy ING Groep NV’s Geneva- based wealth management business for 520 million Swiss francs ($506 million) in cash.

The purchase will increase Julius Baer’s managed client assets by about 10 percent to more than 160 billion francs, the Zurich-based bank said in a statement today. The price amounts to 2.3 percent of client assets under management, adjusted for surplus capital, Baer said.

“The price is surprisingly low,” said Tobias Bruetsch, an analyst at Bank Vontobel in Zurich who has a “hold” rating on the bank. “This increases Baer’s asset base at an attractive price, although the integration costs could be a little high.”

Baer rose 3.3 percent in Swiss trading. Chairman Raymond Baer said the bank “is taking advantage of current market developments” with the purchase, which will double its size in Geneva and bolster business in central and eastern Europe and Russia. For ING, which received a 10 billion-euro ($14.7 billion) lifeline from the Netherlands last October, the sale marks a step in an effort to raise as much as 8 billion euros disposing of assets.

Julius Baer rose 1.3 francs to 40.50 francs, valuing the bank at 8.4 billion francs. ING advanced 0.8 percent to 11.77 euros in Amsterdam.

Asia Unit Next?

The sale comes at a time when Swiss banks, including Julius Baer, have said they will look to Asia for growth, as Switzerland faces pressure from the U.S., France and Germany to loosen privacy protection for clients.

HSBC Holdings Plc of London and Singapore’s DBS Group Holdings Ltd. are in the final stages of bidding for ING’s wealth management unit in Asia, two people familiar with the matter said. That business may fetch at least $1.3 billion, said the people, who declined to be identified because the discussions are confidential.

A DBS spokeswoman in Singapore said the company doesn’t comment on its mergers and acquisition activities. An HSBC spokesman in London didn’t immediately return a call seeking comment. Anneloes Geldermans, an ING spokeswoman, declined to comment.

The sale to Julius Baer will generate an estimated net profit of 150 million euros for Amsterdam-based ING, the bank and insurer said today.

The Swiss unit has offices in the cities of Basel, Lausanne, Lugano and Zurich, the alpine resort of Crans Montana, as well as Monaco and Jersey. It employs 310 staff, including 80 private bankers. Julius Baer expects the purchase to have no effect on earnings per share in 2010, and to add to earnings starting in 2011.

‘Reasonable’ Price

The quality of the ING assets that Baer is buying is difficult to judge, said Benoit Petrarque, an Amsterdam-based analyst at Kepler Capital Markets, who rates ING “buy.” “The price seems to be reasonable both for ING and Julius Baer.”

Baer aims to increase net new money by as much as 6 percent of total assets annually through 2012, excluding acquisitions, in part by adding 40 to 50 bankers a year, the company said last month. The private bank attracted 3.8 billion francs in new client funds in the first half. Net income fell 13 percent in the period to 246 million francs from a year earlier.

Baer slipped to fifth by client assets among Switzerland’s wealth managers from third following this month’s split with GAM Holding Ltd., its asset management arm. UBS AG is the country’s biggest, followed by Credit Suisse Group AG, closely-held Pictet & Cie. and HSBC’s Swiss business.

To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.net

Last Updated: October 7, 2009 12:08 EDT