Swiss Bank Eyes Merrill's Euro Wealth Management

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Includes: BAC, CS, RY
by: Weiss Ratings

Switzerland's largest bank by asset size, Baer Holding AG (BAER.VX) with a Weiss Global Strength Rating of C+ (Fair), is reportedly in talks to buy Bank of America Corp's (NYSE:BAC) Merrill Lynch international wealth-management business. The deal could be worth in the area of $2 billion for the non-U.S. Merrill Lynch business. Other banks interested in the $90 billion in assets Merrill manages for mostly wealthy European clients include Credit Suisse Group (NYSE:CS) and the Royal Bank of Canada (NYSE:RY).

Bank of America seems to have determined the assets under management were not profitable for them to focus on in relation to their other business interests.

Baer is looking to gain scale to offset declining margins. The deal could add almost 50% to Baer's assets under management.

This could be a positive move for Baer assuming it can generate sufficient income from these acquired wealth management assets to make the business profitable.

The traditionally secretive Swiss banking model is under pressure as the U.S. cracks down on tax havens. Julius Baer is currently one of 11 Swiss banks under investigations by U.S. authorities for helping Americans evade taxes.

As many investors have moved assets to the sidelines, Swiss banks are scrambling to find ways to offset the revenue declines brought on by less investor activity. And, tighter U.S. regulations will make Swiss banks less attractive unless they can generate investment returns (not just tax havens) for clients.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.