Published October 09, 2012
ZURICH – Swiss private bank Julius Baer will cut up to around 1,000 jobs as a result of its purchase of part of Bank of America Merrill Lynch's wealth management business.
Baer said it planned a "significant reduction of former Bank of America corporate overhead" as well as cuts to the middle and back office functions of the combined group, reducing the combined staff of approximately 5,700 by 15-18 percent.
Baer, which is presenting details of the acquisition to analysts and investors in London later on Tuesday, also reported that its assets under management (AuM) rose to 184 billion Swiss francs ($197.11 billion) at the end of August from 179 billion at the end of June.
The bank said the increase resulted from net new money inflows close to the top end of its medium term target range, a positive market performance and a positive currency impact, mainly due to the strengthening of the dollar.
The gross margin was slightly lower than the 98 basis points reported for the first six months and the cost income ratio slightly higher due to a small contraction in client activity over the summer.
Julius Baer is acquiring Merrill Lynch's wealth management business outside of the United States and Japan to expand in fast-growing emerging markets.
Baer launched a rights issue on Monday to help pay for the deal, seeking to raise 492 million francs. Shareholder opposition forced it to cut the size of the rights issue from an initially planned 750 million francs.
Baer said it expected the deal to close in the first quarter of 2013 and for about 80 percent of the total assets to be acquired to be reported at Julius Baer by the end of 2013.
It has said the deal should add 57-72 billion francs in assets, although the actual amount transferred could vary due to client attrition and market performance during the integration.
Baer said the planned cost cuts should lead to a implied cost-income ratio of about 70 percent and a pre-tax profit margin of about 25 basis points for the acquired business on Julius Baer's platform in 2015.
It said the transaction would be at least earnings per share neutral in 2014 and contribute 15 percent to EPS in 2015.
($1 = 0.9335 Swiss francs)
(Reporting by Emma Thomasson; Editing by David Cowell)