Julius Baer Adds $6.8 Billion of Brazilian Client Assets

Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, is adding Latin American client assets by acquiring a larger stake in a Brazilian financial firm.

Julius Baer expects to report another 6 billion Swiss francs ($6.8 billion) of managed assets after it increased its holding in GPS Investimentos Financeiros & Participacoes SA to 80 percent, from the 30 percent owned since May 2011, the Zurich-based bank said today in an e-mailed statement.

The terms of the transaction, which will boost Julius Baer’s earnings in 2014, were not disclosed.

“Our majority participation enables us to gain long-term access to one of the most attractive and promising domestic wealth management markets worldwide,” Chief Executive Officer Boris Collardi said in the statement.

Julius Baer rose 1.17 percent to 38.88 francs by the close of Swiss trading, trimming the decline this year to 9.24 percent.

Swiss banks are trying to grow customer assets from emerging-market regions such as Asia and Latin America after a crackdown on undeclared offshore bank accounts by U.S. and European governments crimped growth in traditional cross-border markets. Julius Baer is making deals to compete with Switzerland’s largest wealth managers, UBS AG and Credit Suisse Group AG, in Asia and Latin America.

Merrill Deal

Through the acquisition of Bank of America Corp.’s non-U.S. Merrill Lynch businesses, Julius Baer reported 53 billion francs of new client assets last year. The deal, which was announced in August 2012, includes units in Uruguay, Chile and Panama. The transfer of Latin American Merrill Lynch client assets was slower than expected, Collardi said on Feb. 3 at an investor presentation in Zurich.

Latin American private wealth is set to grow by more than 8 percent a year to $5.9 trillion by 2017, Boston Consulting Group said in a report last year. Julius Baer to looking to make other acquisitions in the region, particularly in Mexico and Chile, Marc Braendlin, who is in charge of operations in Brazil for the bank, said in a telephone interview today.

While private banking assets under management in Brazil rose 9.5 percent to 577 billion reais ($249 billion) in 2013, the pace of growth slowed compared with more than 20 percent recorded in each of the previous two years, according to Anbima, the country’s capital markets association.

Cooling Growth

The overall market has cooled and that will continue through 2014, said Braendlin. “GPS’s growth has been very strong and is expected to be very strong in the future.”

The Swiss are vying with local banks such as Itau Unibanco Holding SA, Banco Bradesco SA, Grupo BTG Pactual and Banco do Brasil SA to manage money for rich Brazilians. Credit Suisse’s private-banking unit in Brazil has 63 billion reais under management, Drew Benson, a New York-based spokesman for the bank, said by e-mail. UBS is building a wealth-management business in Brazil and had 5.5 billion reais under management at the end of 2013, Gregg Rosenberg, a New York-based spokesman for the company, said by e-mail.

While Latin American clients can deposit assets with Julius Baer in Switzerland, the bank is also seeking to build its presence in Brazil through its ownership of Sao Paulo-based GPS, which is the largest independent wealth manager in the country, according to today’s statement.

Acquisition Price

GPS, established as a partnership in 1999 by Jose Eduardo Martins, Marco Belda and Roberto Rudge, almost doubled assets under management in the past three years and employs more than 120 people. Julius Baer may have paid 90 million francs to 100 million francs to acquire the 50 percent stake in GPS, according to an estimate by Alevizos Alevizakos, a London-based analyst with Mediobanca SpA.

Julius Baer also provides services for Latin Americans from offices in Montevideo, Santiago and Nassau, Bahamas and is developing a business in Panama acquired from Bank of America as its cross-border hub for the region.

While the Merrill Lynch transaction helped boost assets under management to 254 billion francs at the end of December from 249 billion francs at the end of October, Julius Baer has said integrating that business, which recorded a pretax loss in 2011, will initially weigh on profitability, before boosting earnings by 2015.

The total assets absorbed from the Merrill Lynch deal will be “toward the lower end” of a target range of 57 billion francs to 72 billion francs, the company said on Feb. 3.