Julius Baer to buy ING's Swiss bank

Julius Baer will buy ING's Swiss private banking assets for 520 million Swiss francs ($507m or Dh1.86 billion), the European wealth management industry's biggest deal since the crisis began.

Baer is paying about 2.3 per cent of assets under management (AUM) for the business excluding surplus capital, and about three per cent including the surplus, roughly in line with expected valuations. Before the financial crisis, similar deals attracted prices above five per cent of AUM.

"The Baer/ING deal was already expected. Strategically it makes sense," said a Zurich-based trader. "They are paying three per cent of assets, which is fairly attractive."

Baer shares were up two per cent at SF40 at 0743 GMT, while shares in Dutch financial services group ING were up 2.8 per cent at €11.995. Last week the stock hit a year high above €12 a share as anticipation of a deal with Baer grew.

Julius Baer is paying cash and expects the deal to generate SF35m in cost savings and to add to earnings from 2011. The ING unit has about SF15bn in assets under management, including surplus capital of SF170m.

Baer recently built its war chest by listing its US asset management arm Artio. Last week it separated off asset management arm GAM Holdings in a bid to free itself up for dealmaking.

Baer Chief Executive Boris Collardi had said Global Wealth Management Summit on Monday he was "hopeful" on the outcome of the ING sale.

He also said he had turned down five to 10 deals over the last year, indicating a cautious attitude to available assets.

Ranked after UBS and Credit Suisse as the third biggest wealth manager in Switzerland, Baer is also seeking to build Asia as a second major market.

With the deal, expected to close early in 2010, Julius Baer said it would have SF160bn under management.

ING said the deal would deliver €150m of profit and free up €250m of capital. A source close to the company's sale programme has said it expects the total package of private banking assets to be sold, including its Asian wealth management operations, to fetch about $2bn.

"We are not very optimistic about the price of ING's Swiss private banking activities, but expect better multiples for ING's Asian private banking arm," said SNS Securities analysts in a research note.

The sale of the Swiss assets came more than a month after most bids for the private banking units were made on September 3. The sale of the Asian assets could take more time because of regulatory issues, said insiders.

"The Asian sale is a few weeks away," said one of the insiders, adding regulatory approvals from the Monetary Authority of Singapore, the city-state's central bank, could take time.

HSBC is seen as a front-runner for these assets, while Singapore's DBS Group has also bid for the Asian assets, insiders have said.

"This signals that the consolidation phase has just begun in the industry, and we are of the opinion that going forward we will see many such deals coming through in the Asia Pacific market," said Ravi Nawal, a senior analyst at consultant Celent.

HSBC's CEO of global private banking Chris Meares said Wealth Management Summit the bank had looked at ING assets and described the proposed sale by the Dutch bank as a rare opportunity in Asia.

The move is part of ING's restructuring drive to sell €6-8bn in assets and exit 10 of the 48 countries where it does business.

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