Julius Baer May Face Higher U.S. Fine, SonntagsZeitung Says

Updated on
  • Bank may have to pay twice the provision it set aside, SZ Says
  • Higher penalty could put merger strategy into question

Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, may have to pay more than it anticipated to reach a settlement with the U.S. Justice Department over American offshore accounts, Swiss newspaper SonntagsZeitung reported.

U.S. prosecutors could ask Julius Baer to settle for double the $350 million earmarked by the bank, the newspaper reported on Sunday, citing people familiar with the matter. Julius Baer spokesman Jan Vonder Muehll declined to comment on the article.

Julius Baer set aside $350 million in June to resolve the four-year investigation by the Justice Department. A month later, the company reported net income fell to 39 million francs ($39.3 million) from 178.3 million francs, mostly tied to the provision. Chief Executive Officer Boris Collardi said he’s “very hopeful” the tax dispute will be closed this year.

Shares Decline

Representatives of the company will meet with U.S. officials later this month for “decisive” negotiations, the newspaper reported without saying where it got the information. Julius Baer declined 1.9 percent to 44.99 Swiss francs as of 9:50 a.m. in Zurich.

The newspaper story is a negative for Julius Baer, Jonas Floriani, a London-based analyst at Keefe, Bruyette & Woods, said by phone.

“The bank was showing confidence that the amount set aside as provision was enough,” Floriani, who has an outperform rating on the stock, said. A higher fine may raise questions on the bank’s capital position and doubts about its ability for mergers and acquisitions, he said.

Julius Baer agreed to buy Commerzbank AG’s wealth management unit in Luxembourg and increased its stake in Italy’s Kairos Investment Management SpA to 80 percent. The bank may consider a bid for Barclays Plc’s Asia wealth unit, Reuters reported on Friday.