Regulatory concerns stopped Julius Baer, EFG takeover talks, sources say

EFG International AG

18/06/2024 18:27

By Oliver Hirt
       ZURICH, June 18 (Reuters) - Swiss regulatory concerns
scuppered talks between private banks Julius Baer  BAER.S  and
EFG International  EFGN.S  over a potential tie-up worth some 15
billion Swiss francs ($17 billion), two sources with knowledge
of the matter told Reuters.
    The two banks held talks in early 2024 and reached an
agreement in principle, the sources said on Tuesday, speaking on
condition of anonymity because of the sensitivity of the matter.
    But financial regulator FINMA signalled that it had concerns
about the potential deal, the sources said. It is still
reviewing Julius Baer's risk controls after the bank suffered
losses tied to loans to failed property firm Signa, one added.
    Talks between Julius Baer and EFG then stopped and have not
resumed, the two sources said.
    FINMA, EFG and Julius Baer declined to comment.
    The number of Swiss private banks has been shrinking as
smaller players seek scale, and Julius Baer and EFG had also
engaged in talks about a tie-up in previous years.
    Signa's collapse in late 2023 rocked Julius Baer after it
had lent heavily to the firm run by Austrian magnate Rene Benko.
    Julius Baer ousted its CEO in February after it was forced
to write down 586 million Swiss francs in losses on loans to
Signa, and said it would exit its private debt business.
    EFG has a market value of 3.9 billion francs against Julius
Baer's 10.6 billion francs. The banks had considered EFG CEO
Giorgio Pradelli as a potential head of a combined entity,
Reuters reported last month
    Julius Baer is still looking for a permanent CEO. 
    Analysts say a takeover today might make financial sense but
strategically it is a tough sell, pointing to risks around
integration, asset attrition and cultural differences. 
    Keefe, Bruyette & Woods analysts said in May that the timing
of the talks was "questionable" given the regulatory scrutiny
over Signa.
    FINMA's review of Julius Baer comes at a critical time for
the regulator, which was heavily criticised for its handling of
the collapse of Credit Suisse. The regulator wants more powers
to improve supervision and safeguard Swiss financial stability.
    Stefan Walter, a former ECB official, has been leading FINMA
since April after the previous head quit in September.
($1 = 0.8834 Swiss francs) 

 (Reporting by Oliver Hirt; Additional reporting by Mathieu
Rosemain in Paris and Jesús Aguado in Madrid; Editing by Tommy
Reggiori Wilkes and Alexander Smith)
 ((thomas.wilkes@thomsonreuters.com))