Julius Baer Holding AG is reportedly closing in on a deal to acquire Bank of America’s international wealth management unit for a purchase price somewhere in the vicinity of $2 billion.
If the deal is consummated, analysts say it would boost the Swiss private bank’s total assets under management – $186 billion as of the end of April – by roughly 50%.
For BofA, the sale of its non-U.S. wealth management business, which manages more than $90 billion in mass affluent client assets, would mark the latest manifestation of CEO Brian Moynihan’s strategy to sell off non-core businesses to boost capital and streamline operations as the nation’s second-largest bank by assets continues to regroup in the wake of the financial crisis.
On its website, Julius Baer officials said it was “in discussions with Bank of America about Merrill Lynch’s international wealth management business” but cautioned that “given the early stage of these discussions, the outcome is entirely open.”
John McIvor, a Bank of America spokesman, said the bank had no comment on any potential deal at this time.
“As you know, Julius Baer put out a statement yesterday morning but I’m afraid that we have nothing to add to it at this point,” he said in an email.
Analysts said Julius Baer wants to expand its wealth management business in emerging markets, Asia and other regions to offset flagging client activity in its home market. In 2010, Baer and Singapore-based Oversea-Chinese Banking Corp. acquired ING’s private banking assets for $1.9 billion. It also acquired ING Groep NV’s Geneva-based wealth business in 2009.
“We expect an acquisition of the BofA/ML wealth management business up for sale would increase the scale of Baer’s European onshore business, which is positive,” Teresa Nielsen, an analyst at Bank Vontobel, wrote in a research note Wednesday.
“[But] questions still remain around the quality of the AUM for sale, its cost income ratio and profitability,” she added. “We believe the acquisition could lead to high execution risk due to differences between Swiss and American cultures.”
In May, Reuters reported that Credit Suisse and Royal Bank of Canada were among the firms to put in initial bids for BofA’s non-U.S. wealth management unit. And in November, Julius Baer made a run at Bank Sarasin & Cie AG, another Swiss-based private bank, before eventually losing out to a winning 1 billion-franc bid from Brazilian-Swiss private bank Safra Group.
Bank of America Merrill Lynch’s global wealth management and investment management unit in April posted a first-quarter profit of $547 million, more than doubling the $259 million it earned in the fourth quarter, and the second-highest quarterly profit since the Merrill acquisition in 2008.
Larry Barrett writes for Financial Planning.