ZURICH (Reuters) - Julius Baer BAER.VX stock jumped nearly 6 percent to an all-time high on Wednesday after the Swiss private bank said it would book an initial $350 million for an expected settlement in a U.S. tax probe, far less than the market had expected.
The criminal investigation centers on how the Swiss bank helped wealthy Americans avoid taxes.
Zuercher Kantonalbank raised its rating to "overweight" from "market weight".
"We have always argued that the U.S. case is the sword of Damocles over Baer's share price. It seems now the sword has been put back in its sheath," analyst Michael Kunz wrote in a note to clients.
"This is much less than feared and removes a major uncertainty from the case," Kepler Cheuvreux analyst Dirk Becker said in a research note, maintaining his "reduce" rating on the stock given what he called its high valuation.
Safra Sarasin analyst Rainer Skierka cited news that U.S. officials had not requested a guilty plea in the case as another positive factor, adding that excess capital after a fine of that magnitude would give Baer leeway for a higher payout ratio, share buybacks or acquisitions. He maintained his "buy" rating.
Some analysts had expected Baer to set aside as much as 850 million Swiss francs ($914 million) for the case.
Baer stock was up 4.7 percent at 53.95 francs at 0825 GMT (0425 EDT), of a high at 54.55.
The Zurich-based private bank said discussions with U.S. justice officials had "sufficiently advanced" for it to make an initial judgement on the financial penalty it will pay to resolve the long-running investigation.
"Whilst there is no defined timetable for a final settlement, Julius Baer continues to work towards closing this regrettable legacy issue as soon as possible," the bank said in a statement late on Tuesday.
Asked whether it would plead guilty to criminal charges like larger rival Credit Suisse CSGN.VX did in May 2014, a bank spokesman U.S. officials had not requested it to do so.
Bank Berenberg analysts cautioned that final settlements in such cases are usually higher than the initial provision, noting Credit Suisse settled a similar investigation for 2.51 billion francs versus the preliminary provision of 892 million.
If the final settlement is higher than 1.125 billion, "it may raise capital concerns and restrict Baer’s expansion plans," the analysts said in a note.
Reporting by Michael Shields; Editing by Jason Neely and Keith Weir