Julius Baer Drops as Downgrade Cites U.S. Risks: Zurich Mover

Julius Baer Drops as Downgrade Cites U.S. Risks
Pedestrians pass a Julius Baer Group Ltd. branch in Zuric. Photographer: Peter Frommenwiler/Bloomberg

Julius Baer Group Ltd. fell the most in three weeks after Vontobel Holding AG cut the stock of the Swiss wealth manager to “reduce” as risks from a U.S. tax probe intensify.

Baer declined as much as 3.6 percent in Zurich trading and closed 3 percent lower at 37.28 Swiss francs. That cut the bank’s market value to 7.7 billion francs ($8.4 billion). The 20-company Swiss Market Index dropped 1 percent.

Wegelin & Co., a 270-year-old private bank, agreed on Jan. 27 to sell most of its business to Switzerland’s Raiffeisen Group after coming under investigation in the U.S. for allegedly helping Americans evade taxes. Officials in the U.S. and Switzerland are in talks to find a settlement that will resolve criminal probes of 11 Swiss banks.

“We believe Julius Baer investors will increasingly focus on the U.S. tax matter,” Teresa Nielsen, an analyst at Vontobel in Zurich, wrote in a note to clients today. The bank may set aside part of its excess capital against a potential U.S. fine, reducing Baer’s capacity to make acquisitions, she said.

Credit Suisse Group AG, Switzerland’s second-biggest bank, booked provisions of 295 million francs in the third quarter related to tax matters in the U.S.

Baer said in November that the outcome and potential impact of negotiations between Switzerland and the U.S. on alleged tax evasion by American clients of Swiss private banks was not “reliably assessable.” The Zurich-based bank declined to comment further in an e-mailed response to questions today.

Threats of Punishment

“I cannot say that other banks are in a similar situation,” Swiss Finance Minister Eveline Widmer-Schlumpf said Jan. 28 when asked whether more Swiss banks may follow Wegelin’s path. “What I know is that various banks have been confronted with threats of punishment from the U.S. We need to continue to try everything to reach a solution.”

The 43-company Bloomberg Europe Banks and Financial Services Index fell 3.2 percent today, with France’s BNP Paribas SA and Credit Agricole SA among the biggest decliners.

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