Julius Baer CEO Seeks Deals to Tap Affluent Latin ClientsGiles Broom
Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, is searching for deals in Latin America where millionaires are increasingly banking onshore.
“Latin America represents for Julius Baer a core market in which we want to expand further,” Boris Collardi, chief executive officer of the Zurich-based firm, said in an e-mailed response to questions late yesterday, after a presentation to reporters in Sao Paulo. “We are principally interested to further grow our footprint either organically or via selected acquisitions.”
Julius Baer added about $6.8 billion of managed client assets in the first quarter by increasing its holding in GPS Investimentos Financeiros e Participacoes SA, a manager in Brazil, the region’s largest wealth market. Julius Baer may have paid about 100 million francs ($112 million) to increase its stake in GPS to 80 percent from 30 percent, according to an estimate by Mediobanca SpA.
Banks in Switzerland, the world’s largest cross-border financial haven, are trying to increase customer assets from emerging-market regions such as Asia and Latin America after a crackdown on undeclared offshore bank accounts by the U.S. and European governments crimped growth in traditional cross-border markets.
Latin American private wealth is set to increase by more than 8 percent a year to $5.9 trillion by 2017, Boston Consulting Group said in a report last year.
Julius Baer is integrating Merrill Lynch wealth units in Latin America, Europe, the Middle East and Asia acquired from Bank of America Corp. in 2012 as it seeks to compete with Switzerland’s largest wealth managers, UBS AG and Credit Suisse Group AG. The deal included units in Uruguay, Chile and Panama.
Julius Baer, which oversaw 254 billion Swiss francs for customers at the end of December and doesn’t provide figures on managed assets by region, sees Brazil as a “predominantly onshore market,” while Mexico and Chile show a “similar trend” toward domestic management, Collardi said.
The proportion of Brazil’s private wealth booked outside the country may drop to 25 percent from 30 percent and millionaires who do send new money offshore are increasingly favoring the U.S. over Switzerland, Daniel Kessler, a Zurich-based consultant at BCG, said in a telephone interview April 2.
Switzerland has accumulated about 30 percent of Brazil’s offshore private wealth, while an equal amount is harbored in the U.S., according to BCG. Some 25 percent to 28 percent of funds are in the Caribbean, while the rest is mainly booked in London and the Channel Islands.
“We haven’t seen outflows out of Switzerland, but an over-proportionate share of new money is going to the U.S. than in the past,” Kessler said. “Many of these clients have a very close affiliation to the U.S. They have second homes in the U.S. and children at school there.”
While Julius Baer can also take deposits in Nassau, Bahamas, Europe and Asia, and is developing Panama as a cross-border hub for the region, it doesn’t have a presence in the U.S., unlike UBS or Credit Suisse, or Germany’s Deutsche Bank AG. “We do not feel at any disadvantage,” Collardi said.
Julius Baer sold its North America-based private-banking units to UBS in 2005 and was subsequently investigated by the U.S. Department of Justice for helping Americans hide money from the Internal Revenue Service in cross-border business from Switzerland.
Collardi said in July that Julius Baer would not re-open a presence in the U.S. “under any circumstances.” Julius Baer has said it exited the U.S. cross-border business between 2009 and 2011. The DoJ probe, which has embroiled at least 14 Swiss banks, remains unresolved.