Julius Baer Group Jumps On Credit Suisse Takeover Speculation

Julius Baer touched an all-time high amid speculation that Credit Suisse is evincing interest in buying the Swiss private bank.

Both Julius Baer and Credit Suisse declined to comment.

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Julius Baer faces U.S. investigation

Following today’s speculation that Credit Suisse might be interested in buying Julius Baer, the private bank’s shares rose as much as 5.1% to 52.15 Swiss francs, the highest since it was listed in October 2009. The Swiss private bank was trading at 51.70 francs as of 3:18 pm in Zurich.

However, Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland told Bloomberg that: “It’s just a rumor that comes out every three months, and a part of the market believes it”. He added: “Swiss private banking is going through a tough moment, so there’s certainly some interest to consolidate the business into bigger entities”.

Galliker notes the Swiss private bank still has a tax issue with the U.S. to deal with, and as long as this issue is unresolved, no one will be interested in buying Julius Baer.

As reported by ValueWalk, about a dozen Swiss banks have reportedly been targets of U.S. investigators. The list included the Credit Suisse Group AG and  Zurich-based Julius Baer Gruppe AG. In 2013, the Swiss government ordered its third largest private bank, Julius Baer, to hand over data on U.S. clients.

Last year, Credit Suisse admitted to a U.S. court that it set up sham companies to facilitate clients in unlawfully funneling assets away from the Internal Revenue Service. Moreover, the bank agreed to pay $1.8 billion to U.S. federal authorities, $715 million to the New York state banking regulator and $100 million to the Federal Reserve.

Julius Baer ruled out potential sale in February

Reacting to the U.S> investigation, Julius Baer has said it can’t reliably estimate the potential fine to resolve the case, which it anticipates to settle this year. While Julius Baer spokesman said the bank doesn’t comment on speculation, Credit Suisse spokeswoman declined to comment.

In February, Boris Collardi, the chief executive officer of Julius Baer, ruled out holding talks with potential buyers and indicated the Swiss wealth manager isn’t for sale.

Michael Kunz, an analyst with Zuercher Kantonalbank, said the Swiss wealth manager is well-positioned as an independent wealth manager and said: “A merger with Credit Suisse just doesn’t add up”.

Recently, Oakmark Funds said its Swiss banks holdings (viz.: Credit Suisse Group AG and Julius Baer) have very large and profitable private banking operations. The fund believes both the banks are low risk and generate a tremendous amount of free cash flow.

On Tuesday, UBS Group AG analysts reiterated their “buy” rating and upgraded their Julius Baer target price by 20% to 55 francs, citing earnings-per-share growth, cash returns and strategic flexibility.