Julius Baer Agrees to Buy Commerzbank's Luxembourg Unit

  • Bank's Luxembourg assets will rise to 5 billion Swiss francs
  • Swiss financial firms expanding operations in Luxembourg

Julius Baer Group Ltd. agreed to buy Commerzbank AG’s private bank in Luxembourg, adding about 3 billion euros ($3.3 billion) in assets under management.

The Swiss wealth manager will pay about 68 million euros, assuming that 25 million euros of regulatory capital is transferred as part of the transaction, Julius Baer said in a statement on Wednesday. The Zurich-based bank expects restructuring and integration costs of about 20 million euros for the deal, which is seen closing by mid-2016.

Swiss banks including Credit Suisse Group AG are stepping up their operations in Luxembourg to help them comply with new European Union financial rules as tighter regulations in Switzerland erode banking secrecy rules. Pictet and Lombard Odier, Geneva’s two largest private banks, are among at least a dozen Swiss firms operating in the country, according to financial regulator CSSF.

“We are pleased to add significant scale to our local franchise in the important international financial center of Luxembourg and look forward to leveraging the business opportunities provided by the full bank license,” Gian A. Rossi, head of northern, central and eastern Europe for Julius Baer, said in the statement.

The transaction will boost the assets under management of the Luxembourg business to about 5 billion francs ($5.05 billion) on a pro-forma basis. The acquisition is seen adding to adjusted earnings once complete, Julius Baer said in the statement.

"For Commerzbank, this is more about focus than cost saving," said Neil Smith, an analyst at Bankhaus Lampe KG. "Their global ambitions as wealth managers are somewhat limited, and this is probably part of a realization that they will never be a UBS." UBS Group AG is the world’s largest manager of millionaires’ money.

Commerzbank was fined 17 million euros this year for tax evasion by clients with accounts in Luxembourg, Sueddeutsche Zeitung reported in October. The investigation by Germany is now complete, a spokesman said on Wednesday, declining to comment further.

Julius Baer Chief Executive Officer Boris Collardi has been expanding through acquisitions such as of Swiss asset manager Fransad Gestion SA. The company said last month that its gross margin narrowed as of the end of October and net client inflows missed the firm’s 4 percent to 6 percent medium-term annualized growth target.

Julius Baer’s shares fell as much as 1.1 percent and were down 0.5 percent at 44.2 Swiss francs at 11:28 a.m. in Zurich trading. Commerzbank shares were little changed at 11:26 a.m. in Frankfurt trading.

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