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IPE special report May 2018

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Julius Baer facing client attrition – Moody’s

SWITZERLAND – Bank Julius Baer & Co. could be facing client “attrition” as it seeks to absorb the three Swiss banks and the GAM arm it is buying from UBS, Moody’s Investors Service says.

Julius Baer announced in September it would buy the banks from its larger rival in a deal worth around CHF5.6bn (€3.6bn). The move would add around CHF119bn in assets but cost up to 350 jobs.

The rating agency said the “execution risks” of the transaction and the anticipated expansion were “not negligible”.

It added that “attrition among the banks' customers and investment advisors, probably accompanied by a meaningful, persistent erosion of the asset base, could possibly weigh on Bank Julius Baer's performance and credit quality”.

It assigned a Aa3 senior unsecured and B- financial strength ratings to Bank Julius Baer & Co. AG and confirmed the bank's Prime-1 short-term rating.

It also assigned an A1 issuer rating to parent company Julius Baer Holding AG. All ratings carry a stable outlook.

The ratings reflected Julius Baer's “current commercial and financial profile as much as the strategic benefits and potential challenges” associated with deal.

Moody’s highlighted Julius Baer's “strategic choice” to expand and to act as consolidator in a still highly fragmented industry which is in the early stages of a consolidation process.

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