Julius Baer May Cut 1,000 Jobs After Merrill Acquisition

Swiss firm still looking to cut costs even as it purchases assets

(Photo: AP) (Photo: AP)

Swiss-based Julius Baer Group could cut as many as 1,000 jobs across the globe. The bank seeks to reduce its workforce by 15%–18%, now that it has a combined staff of some 5,700 in the wake of its acquisition of Bank of America-Merrill Lynch’s former U.S. wealth management units.

Bloomberg reported Tuesday that the acquisition posted a loss for the first half of the year of $30.4 million. Baer had agreed to buy the units in August in an effort to boost assets under management as it seeks to better compete with larger institutions like UBS and Credit Suisse Group. Baer is looking for a rise in profits from the acquisition, starting in 2015, that will increase its earnings per share by 15% once integration and restructuring costs are eliminated.

The recent crackdown by the U.S. over tax evasion strategies has resulted in an outflow of assets under management from Swiss banks as customers repatriate their money. The purchase of Merrill Lynch’s wealth units has added a substantial number to Baer’s workforce; as of the end of June, those Merrill units employed some 2,100 people in almost 30 countries outside the U.S. and Japan.

The full cost of Baer’s acquistion is expected to run to 1.47 billion francs ($1.904 billion) altogether, once integration costs and incentives to relationship managers are figured in. The purchase itself, Baer said in August, would cost as much as 860 million francs for 57 billion to 72 billion francs in Merrill client assets in such diverse locations as Europe, Asia, Latin America and the Middle East.

At the end of August, AUM at Julius Baer increased to 184 billion francs, up from an end-of-June total of 178.8 billion francs after net inflows close to the top of the firm’s 4%–6% target range. Since the end of 2009, Baer’s client assets have increased 20%.

“Before I recommend the stock, I’d like to see evidence that the cost-cutting will improve the bottom line,” said Dirk Becker in the report. Becker, an analyst at Kepler Capital Markets in Frankfurt who has a hold rating on the shares, added, “It’s way too early to judge this.”

He added, “When you’re cutting costs, you’re also cutting revenue. I think it will be a tough job. There’s a reason why Bank of America didn’t want this business anymore and why it was loss-making for them.”

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