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DealBook: Swiss Bank Julius Baer to Buy Bank of America Unit

August 14, 2012 by Leave a Comment

Boris Collardi, chief of the Swiss bank Juluis Baer.Arnd Wiegmann/ReutersBoris Collardi, chief of the Swiss bank Juluis Baer.

LONDON — The Swiss bank Julius Baer agreed on Monday to buy the private banking operations outside the United States of Bank of America Merrill Lynch, in a deal that will increase the European firm’s assets under management by 40 percent.

The acquisition is the latest consolidation move in the private banking industry, as firms look to bolster their operations to gain access to the new markets of emerging economies.

As part of this effort, Julius Baer will pay about $882 million for the American bank’s international wealth management business outside of the United States. The sale does not include Bank of America’s joint venture in Japan, Mitsubishi UFJ Merrill Lynch PB Securities

In total, the division has about $84 billion of assets under management.

As part of the deal, Bank of America will be given about $246 million of Julius Baer stock, giving the American bank a 3 percent stake in the Swiss firm.

Even so, Bank of America has been shedding overseas holdings, in large part to raise capital. In November, it recorded a gain of $1.8 billion after taxes on the sale of its stake in China Construction Bank. And it sold its credit card business in Canada.

For Julius Baer, the acquisition will increase the bank’s assets under management to about $258 billion. Under the terms of the deal, the Swiss firm will oversee up to an additional $74 billion of assets, which primarily come from wealthy clients in developing economies.

“This acquisition brings us a major step forward in our growth strategy and will considerably strengthen Julius Baer’s leading position in global private banking by adding a new dimension not only to growth markets but also to Europe,” the company’s chief executive, Boris Collardi, said in a statement.

Despite the bank’s large increase in assets under management, investors reacted negatively to the news. Shares in Julius Baer fell 7.4 percent by the close of trading in Zurich on Monday.

The shareholder response came after the Swiss bank said it would finance the acquisition through existing cash reserves and a $770 million rights offering. The bank said it would raise an additional $257 million for potential future acquisitions and $206 million through hybrid bonds.

The firm also canceled a previously announced $510 million share buyback.

Julius Baer said costs related to the acquisition would total about $320 million, and Bank of America Merrill Lynch would assume about $125 million of costs connected to the deal.

The deal is one of a number of acquisitions by Julius Baer in recent years. In 2009, it bought the private banking unit of the Dutch firm ING for approximately $500 million.

The deal is expected to close by early 2013. Perella Weinberg advised Julius Baer on the acquisition.

Article source: http://dealbook.nytimes.com/2012/08/13/julius-baer-to-buy-bank-of-america-unit/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Julius Baer to Buy Bank of America Unit

August 13, 2012 by Leave a Comment

Boris Collardi, chief executive of Juluis BaerArnd Wiegmann/ReutersBoris Collardi, chief executive of Juluis Baer.

LONDON – The Swiss bank Julius Baer agreed on Monday to buy the private banking operations outside the United States of Bank of America Merrill Lynch, in a deal that will increase the European firm’s assets under management by 40 percent.

The acquisition is the latest consolidation move in the private banking industry, as firms look to bolster their operations to gain access to the new markets of emerging economies.

As part of this effort, Julius Baer will pay around 860 million Swiss francs ($882 million) for the American bank’s international wealth management business outside of the United States. The division has roughly $84 billion of assets under management.

Under the terms of the deal, Julius Baer will oversee up to an additional $74 billion of assets, which primarily come from wealthy clients in developing economies. The acquisition will increase Julius Baer’s assets under management to around $258 billion.

“This acquisition brings us a major step forward in our growth strategy and will considerably strengthen Julius Baer’s leading position in global private banking by adding a new dimension not only to growth markets but also to Europe,” the company’s chief executive, Boris Collardi, said in a statement.

Despite the bank’s large increase in assets under management, investors reacted negatively to the news. Shares in Julius Baer fell almost 6 percent in morning trading in Zurich on Monday.

The shareholder response to the announcement came after the Swiss bank said it would finance the acquisition through existing cash reserves and a $770 million rights offering. The bank said it would raise a further $257 million for potential future acquisitions and $206 million through hybrid bonds.

The firm also canceled a previously announced $510 million share buyback.

As part of the new share sale, Bank of America Merrill Lynch will be given around $246 million of Julius Baer stock, making the American firm a large shareholder.

Julius Baer said costs related to the acquisition would total about $320 million, while Bank of America Merrill Lynch would assume about $125 million of costs connected to the deal.

The deal is one of a number of acquisitions by Julius Baer in recent years. In 2009, it bought the private banking unit of the Dutch firm ING for around $500 million.

The deal is expected to close by early 2013. Perella Weinberg advised Julius Baer on the acquisition.

Article source: http://dealbook.nytimes.com/2012/08/13/julius-baer-to-buy-bank-of-america-unit/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Morgan Stanley Posts $2.15 Billion Profit

October 19, 2011 by Leave a Comment

Morgan StanleyMary Altaffer/Associated PressJames P. Gorman, Morgan Stanley’s chief executive, said the firm “effectively navigated turbulent markets” in the quarter.

Morgan Stanley, buoyed by solid performances in its core divisions and a huge one-time accounting gain, announced third-quarter earnings of $2.15 billion, compared with a loss of $91 million a year ago.

The company’s profit of $1.16 a share handily beat analyst predictions of 30 cents a share, according to Thomson Reuters. In contrast, Goldman Sachs, weighed down by losses on its investments in its own account, reported a loss of $428 million on Tuesday, compared with a $1.7 billion profit a year ago.

Excluding the accounting gain Morgan Stanley notched earnings of three cents a share. Analysts had been forecasting an 11 cent loss.

James P. Gorman, Morgan Stanley’s chief executive, said the firm “effectively navigated turbulent markets” in the quarter.

Morgan Stanley Smith Barney, the firm’s global wealth management division, continued to be a steady performer, posting net revenue of $3.26 billion this quarter, compared with $3.1 billion in the year-ago period. Still, the business got hit by the market turmoil, even as the firm logged record inflows. The division had $1.6 trillion assets under management in the quarter, down from $1.7 trillion in the previous quarter.

Institutional securities, bolstered by a $3.4 billion gain on the value of Morgan Stanley’s debt, had its third-quarter revenue increase 122 percent percent, to $6.45 billion. Asset management reported revenue of $215 million for the period, down 73 percent from the previous year on losses in firm investments.

Morgan Stanley achieved a strong return on equity, something that many firms have found to do this difficult environment. Return on equity from continuing operation, a key measure of profitability, was 14.5 percent, compared with 9 percent in the second quarter. Return on equity measures the amount of money that a company delivers on each share, and is a closely watched ratio among investors.

The firm declared a five cent quarterly dividend for its shareholders. It will be paid on November 15 to shareholders who had stock on October 31.

So far this year, Morgan Stanley has set aside $12.69 billion to cover compensation and benefits, up 6 percent percent from year-ago levels. The firm had 62,648 employees on the payroll at the end of the third quarter, down slightly from the 62,964 employees in the previous quarter.

The firm’s third-quarter results come during a tough time for financial stocks, which have struggled amid regulatory uncertainty and a weak global economy. Shares of Morgan Stanley have fallen 38.9 percent this year, to $16.63 a share.

Article source: http://feeds.nytimes.com/click.phdo?i=32b82fc177b96cba344d1653f9eff3fd

Filed Under: Business News Tagged With: , ,

DealBook: K.K.R. Earnings Fall 25%

August 3, 2011 by Leave a Comment

George Roberts, left, and Henry Kravis, co-founders of Kohlberg Kravis Roberts.Gary SpectorGeorge Roberts, left, and Henry Kravis, co-founders of Kohlberg Kravis Roberts.

Kohlberg Kravis Roberts said on Wednesday that its second-quarter profit fell 25 percent as growth slowed in its main investment businesses.

The private equity giant reported $245.3 million in economic net income after taxes atop $117.6 million in fees. That amounts to an after-tax profit of 36 cents a stock unit; analysts had, on average, expected a profit of 41 cents, according to the market researcher Capital IQ.

Economic net income is a nonstandard profit measure used by publicly traded private equity firms that excludes some stock-based compensation costs. On a generally accepted accounting principles basis, K.K.R. earned $39.6 million for the quarter.

The firm said assets under management grew to $61.9 billion. Much of that growth resulted from an increase in the value of K.K.R.’s investments, as well as from newly raised capital.

“In an increasingly challenged global economic environment, our business continued its growth trajectory across all segments,” Henry R. Kravis and George R. Roberts, the firm’s co-founders and co-chairmen, said in a statement.

K.K.R.’s second-quarter performance trailed that of its main rival, the Blackstone Group, which more than tripled its profit for the period, thanks to its huge real estate arm.

Since becoming a public company, K.K.R. has focused on building up its operations outside of its core leveraged buyout business. The firm has raised billions of dollars for energy and infrastructure investments, and it has bolstered its nascent credit trading division.

Still, K.K.R. pointed to successes in its traditional private equity business. The unit increased assets under management to $47.1 billion, offset by payments made to its investors through the sales of portfolio companies and assets.

Article source: http://feeds.nytimes.com/click.phdo?i=3f62cdb0cc5036e4e76f518b55176adb

Filed Under: Business News Tagged With: , ,

DealBook: Deal-Making Lifts Lazard and Evercore

July 29, 2011 by Leave a Comment

Lazard said on Thursday that its second-quarter profit rose 23 percent from the period a year ago as increasing deal activity and growth in assets under management bolstered results, the investment bank said on Thursday.

Another investment bank, Evercore Partners, reported on Thursday a 119 percent gain in second-quarter revenue, to $142 million.

The results of both banks highlighted the improved market in deal-making, as companies seek growth through transactions such as mergers and asset sales.

Lazard’s chief financial officer, Matthieu Bucaille, said in an interview, “In uncertain or uneven environments, our business model does well, because people are looking for independent advice.”

Lazard reported net income of $65.8 million on a fully exchanged basis and core operating revenue of $486.9 million. Still, the 48-cents-a-share profit fell 1 cent below the average estimate of analysts surveyed by Thomson Reuters.

Its core mergers business reported a 17 percent rise in operating revenue, to $170.6 million for the quarter. Among the deals it worked on that closed in the quarter — important since banks generally earn fees when a transaction is completed — were the Mosaic Company’s spinoff from Cargill and Vodafone’s sale of its $11.3 billion stake in SFR of France.

The firm is also advising on pending transactions such as Medco’s $29 billion sale to Express Scripts, and is advising the Greek government in its debt negotiations.

As expected, Lazard’s restructuring business continued to decline, as fewer companies filed for bankruptcy protection. The unit’s revenue fell 40 percent, to $48.3 million.

Revenue at the firm’s asset management business, which is meant to smooth over the lumpiness of Lazard’s mergers unit, jumped 27 percent, to $237.7 million.

Lazard’s compensation ratio fell to 58.1 percent for the quarter from 59.8 percent in the year-earlier period. Mr. Bucaille said that the firm was maintaining a “laser focus” on keeping expenses contained, even as it hired several prominent executives this year.

Evercore has also made a number of hires. But adding experienced employees meant paying them well, and the firm gave out $101 million, or 71 percent of its revenue, as compensation this quarter, up from 70 percent in the period a year earlier.

Using adjusted pro forma numbers, Evercore had a quarterly profit of $17.8 million, or 43 cents a share, on revenue of $141 million. The adjusted earnings were slightly below analysts’ expectations.

Article source: http://feeds.nytimes.com/click.phdo?i=38a024a0d715731b5ed377768003fe6d

Filed Under: Business News Tagged With: , ,