A partnership between EFG International and Julius Baer is a union that is just waiting to take place. Conversations over a possible merger between the two Swiss private banks were undertaken, according to Bloomberg, citing people who know the situation, although they ceased after an initial attempt earlier this year. UBS's hegemony would not be threatened by the combination of two B-league wealth managers. However, it would make sense financially and address Julius Baer's leadership dilemma.
In 2023, the world took notice of UBS and Credit Suisse's haphazard marriage. Consolidation, however, has been ongoing for years at the lower reaches of Swiss private banking. Between 2010 and the beginning of 2023, the total number of Swiss banks nearly fell to 89, according to KPMG data. There are continuous rumors that Julius Baer, worth 11 billion Swiss francs, and 4 billion Swiss francs, the nation's second and third largest listed wealth players, are considering a possible engagement.
Combining the two would increase the overall size. However, it would only come in a distant second against Sergio Ermotti's massive Swiss team. The combined assets under the control of Julius Baer and EFG, at roughly $640 billion, would be less than 20% of the invested assets at the global wealth management division of UBS.
However, a merger might satisfy both groups of investors. In the event that Julius Baer paid a premium of 30% over EFG's share price prior to the merger announcement, the bid amount would amount to about 4.8 billion Swiss francs, with 1.1 billion Swiss francs serving as the premium. According to calculations, slashing just 15% of EFG's 1 billion Swiss francs in yearly operational expenses — roughly half of what RBC analysts think is feasible — would result in total savings of 1.3 billion Swiss francs, assuming capitalization and 19% tax are applied. In other words, the potential premium is outweighed by the synergy's worth. Using LSEG calculations, EFG's projected before-tax profit of 450 million Swiss francs in 2025 would increase by the savings, yielding an after-tax return on investment of 10%.
A deal could also resolve a bothersome Julius Baer issue. Due to high-risk investments in the now-bankrupt Austrian real estate company Signa, the bank fired former CEO Philipp Rickenbacher in February and is currently searching for a permanent replacement. Also, since the Latsis family owns 45% of the voting rights, any agreement with EFG would need to win their approval. For this reason, Giorgio Pradelli, the current EFG chief who has been in charge since 2018, is a perfect fit to head the joint group.
EFG and Julius Baer's union would not produce a brand-new financial behemoth. However, it might give the prospective couple two wins in one go.
