EFG International AG (EFGN), the Swiss bank controlled by billionaire Spiro Latsis and his family, said it set aside 21.4 million Swiss francs ($24 million) to pay a penalty to U.S. authorities probing tax evasion.
That amount represents EFG’s “best estimate of the final cost of the penalty,” the Zurich-based bank said in an e-mailed statement today as it slipped into a loss in the first six months of the year on legal charges and provisions.
“First-half results were adversely impacted by exceptional legal and regulatory expenses,” Chief Executive Officer John Williamson said in the statement. “I remain optimistic about the future, with the prospect of fewer distractions and a major source of uncertainty being alleviated.”
EFG said in December it entered a U.S. Justice Department voluntary disclosure program through which more than 100 Swiss banks are trying to avoid indictment for helping Americans hide money offshore. The banks have to supply information on cross-border wealth businesses and pay fines to the U.S. government to qualify for a non-prosecution agreement.
Swiss managers that entered the program before the end of last year face penalties ranging from 20 percent to 50 percent of undeclared assets. Persuading clients to volunteer information to the Internal Revenue Service may help the banks reduce penalties. EFG is in “advanced discussions” for a resolution with the U.S., according to the statement.
While neither the timing of such an accord, nor the size of the final penalty is “set in stone,” EFG seeks to reach a settlement with the Justice Department in the next few months, Williamson said at a presentation in Zurich.
EFG rose 1 percent to 10.20 francs as of 10:43 a.m. in Zurich, valuing the company at 1.5 billion francs. The stock has declined 21 percent this year, while the Bloomberg Europe Banks and Financial Services Index slipped 1.7 percent.
EFG had a first-half loss of 6 million francs, compared with a net income of 84.5 million francs a year earlier. The company reported 8.6 million francs in “legal and professional expenses” related to the U.S. program and 33.7 million francs in other litigation-related charges and provisions.
Underlying profit, which excludes some one-time items, fell to 57.6 million francs from 60.3 million francs a year earlier, according to the statement. The company scrapped a goal of reporting 200 million francs of full-year net income by 2015.
“While the charges and provisions for litigation do hit reported profits, we believe that the underlying business is doing well, with the most important performance indicators improving,” Andreas Venditti, an analyst with Vontobel Holding AG in Zurich who recommends buying the shares, said in a note.
EFG reported net new client money of 2.7 billion francs, compared with 1.9 billion francs a year earlier. It increased the number of private bankers managing client relationships to 456 at the end of June from 435 at the end of December.
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