Julius Baer expects to settle U.S. tax case in months

Mon Jul 21, 2014 6:55am EDT
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By Joshua Franklin

ZURICH (Reuters) - Julius Baer BAER.VX expects to strike a deal with U.S. authorities in a matter of months to settle a criminal investigation into the Swiss bank's role in helping wealthy Americans evade their taxes, its chief executive said on Monday.

Shares in the Zurich-based lender shot up 7 percent on the news, recovering much of the ground lost since larger rival Credit Suisse CSGN.VX settled its U.S. tax case in May for $2.5 billion, more than double what the bank had set aside for the purpose.

This sparked some concerns Julius Baer could be caught out by a larger-than-expected fine, leading some in the market to short the stock. Dealers said Baer's half-year results published on Monday, which were above analyst expectations in many areas, eased market fears and led to profit-taking from many short sellers.

Baer has not made a provision for any potential fine, saying it cannot adequately estimate the ultimate amount. In its 2013 results, Baer budgeted 15 million Swiss francs ($16.70 million) for legal fees relating to the U.S. tax evasion case.

The bank's chief executive did not address the possible size of a fine, but did say he thought the Credit Suisse deal could help speed up its own negotiations for it and a host of other Swiss banks, including Geneva-based Pictet & Cie, which are also in the crosshairs of U.S. investigators.

"I continue to believe that in the end we will find a fair and equitable solution for the group. I think we can reasonably say that this is now a topic of a matter of a few more months and not years as in the past," Julius Baer CEO Boris Collardi said on a call after first-half earnings.

Shares in Julius Baer had fallen by around 9 percent since the Credit Suisse settlement, lagging an index of European banks which was down by 2.6 percent since then. By 1002 GMT the stock was up 6.1 percent at 38.79 francs.

One of the factors weighing on the company's valuation has been the uncertainty from the U.S. tax case and J. Safra Sarasin analyst Rainer Skierka said the bank would be boosted by a resolution in the probe.   Continued...

The company logo is placed beside the entrance of the headquarters of Swiss bank Julius Baer in Zurich May 28, 2013. REUTERS/Arnd Wiegmann