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Scale shortfall: Julius Baer concluded that $4 billion in assets in the US could not readily be brought up to a competitive level
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Julius Baer has decided to pull out of the North American wealth management market, having sold its private-banking business there to UBS Wealth Management for an undisclosed amount. The mid-size Swiss bank had been in the US since 1940, and was ones of the first Swiss private banks to be onshore in the region.
Julius Baer will continue to operate its asset management business in the US, but Michael Baer, head of private banking at Julius Baer, says the bank just did not have the scale to be able to continue in wealth management in North America. ?We have $4 billion in assets in the US, but to be significant you need between $8 billion and $10 billion. Our chances of achieving that were slim. We did look at different alternatives, and came to the conclusion that UBS has a comparable offering.?
The deal highlights the difficulties facing smaller foreign private banks targeting the US (see Euromoney October 2004). Observers note the Swiss banks' reputation for high-quality service as an attractive feature for US high-net-worth individuals but point out that the banks lack the financial and management resources to build on their brands. They also suffer from a perception in the US that they do not offer as many products and services as the full-service brokers.
Indeed, Baer says that the sale of its business to UBS, which has $14 billion in assets, will enable clients and staff to transfer to a platform that offers a broader range of services and products. Martin Liechti, head of wealth management international Americas at UBS, adds: ?We've been very successful over the last 12 months, and one key reason is that, in the US, we have a bank and broker/dealer under one roof ? very few wealth managers have the two under one reporting line.?
The deal frees Julius Baer to concentrate on building its private-banking presence in Europe. ?We're refocusing on Germany, and are looking at new European countries. The Middle East and Far East are also areas we are reviewing. We're expanding in Dubai, for example, and will look at possibilities in southeast Asia,? says Baer.
For UBS Wealth Management, the acquisition makes a neat fit. ?Firstly, Julius Baer has a strong reputation,? says Liechti. ?They have a well-established brand name and a great client franchise. And in terms of business models, they are similar. The segmentation and thresholds are the same, for example.? The fact that Julius Baer is Swiss like UBS is almost irrelevant, though, he claims. ?The fact that they are Swiss and we are Swiss is not decisive. We look at domestic names as well across the Americas. The strategic fit is what counts.?