Exclusive: Julius Baer plans wealth management joint venture in China – sources


© Reuters. FILE PHOTO: People walk past a branch of Swiss bank Julius Baer in Zurich

By Sumeet Chatterjee and Brenna Hughes Neghaiwi

HONG KONG/Zurich (Reuters) – Swiss private bank Julius Baer Gruppe AG (S:) plans to set up business in China in partnership with a local financial firm as part of its strategy to boost growth in Asia, people with direct knowledge of the matter told Reuters.

Julius Baer aims to establish a majority-owned joint venture to tap the rapidly growing wealth in the world’s second-largest economy and has started looking for a partner, said the people.

The plan comes as China, the world’s second-largest country by number of billionaires, has been rapidly opening up its financial sector for bigger foreign participation.

If successful, Julius Baer will be the first major private bank to set up a wealth management joint venture in China. Its plan to establish onshore presence is reported here for the first time.

Booming stock markets and a flurry of new listings have created five new dollar billionaires in China each week for the past year, according to the Hurun China Rich List 2020 released earlier this month.

China’s wealth management industry is the fastest-growing in the world but has historically been linked to the sale of high-risk, illiquid investment products and lax regulatory oversight.

That made offshore business – where banks help Chinese clients manage their riches in locations such as Hong Kong, Singapore and Zurich – the preferred route for most global wealth management firms.

In the past year, however, Chinese authorities have cracked down on dubious practices in the domestic wealth management industry as part of a broader push to reduce debt and limit the sale of risky products. They have also made it easier for foreigners to set up wealth management joint ventures.

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Julius Baer, Switzerland’s third-largest listed lender, will likely take a decision on its Chinese partner next year before starting the formal license application process, said the people.

The people declined to be identified as the bank’s plans are confidential. A spokesman for Julius Baer in Zurich declined to comment on the matter.

‘BIG PRIZE’

An onshore presence in China will significantly bolster Julius Baer’s position in Asia, where it competes with compatriots UBS Group AG (S:) and Credit Suisse Group AG (S:) as well as a host of other regional and global wealth managers.

“Mainland China of course is always the big prize,” Julius Baer Chief Executive Philipp Rickenbacher said at a conference in Zurich last month.

“But we’ve seen that, by being present locally, many firms have lost a lot of money in recent years … Is it impossible? No, and we’re working intensely on continuously exploring these possibilities.”

The China business plans come as the bank is also weighing re-establishing presence in the United States to help its Latin American clients book assets.

The bank saw rapid growth over recent years following a period of takeovers and buoyant hiring.

But a money laundering sanction by Switzerland’s finance watchdog earlier this year barring Julius Baer from making large and complex acquisitions – as well as a cost-cutting exercise which started last year – have complicated its path to growth.

It has been looking to emerging markets, as well as a build-out of some of its European operations to bring in fresh assets.

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