Swiss private banking group Julius Baer Group Ltd. (JBAXY.PK, JBARF.PK) Tuesday said it is targeting to reduce pro forma combined staff base of around 5,700 in over 50 locations by 15 to 18 percent. The company's assets under management or AuM increased 8 percent for the first eight months.
This follows its announcement on August 13, to buy Merrill Lynch's international wealth management business outside the United States from Bank of America Corp.(BAC) for around 1.47 billion Swiss francs. The agreed transaction price is 1.2 percent of assets under management transferred, the upper limit being about 860 million francs.
The company's decision to reduce staff base reflects its profitability improvement measures, with a significant reduction of former Bank of America corporate overhead and other allocations not required in the Julius Baer structure.
The measures are expected to lead to a stand-alone implied cost-income ratio of nearly 70 percent and a stand-alone implied pre-tax profit margin on an adjusted profit basis of around 25 basis points for the international wealth management business on Julius Baer's platform in 2015.
With the deal, Julius Baer aims to strengthen its private banking position in growth markets of Asia, Latin America and the Middle East as well as in Europe. CFO Dieter Enkelmann had said in August that the geographic diversification in the deal is expected to significantly reduce the company's net currency exposure to the Swiss franc.
Based on Julius Baer's current integration targets, about 80 percent of the total Assets under Management expected to be acquired are estimated to be reported at Julius Baer by the end of 2013.
Julius Baer expects the transaction to be at least earnings per share neutral in 2014 and it aims earnings per share accretion of 15 percent in 2015. The accretion target is on the basis of adjusted profit, the company noted.
Julius Baer also published a trading update covering the first eight months of 2012. As at the end of August, Julius Baer's AuM was 184 billion francs, an increase of 8 percent since the end of 2011.
Total client assets grew 7 percent to 276 billion francs. The company added that in September, it raised 250 million francs in additional non-core tier 1 capital, as part of its financing of the acquisition.
Bank of America Bank has been cutting thousands of jobs and selling non-core business units as part of its efforts to reduce costs and bolster capital.
In Zurich, Julius Baer shares are currently trading at 32.25 francs, down 0.13 francs or 0.4 percent, on a volume of 202 thousand shares.
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