Pre-tax profit at Julius Baer dropped by 21% to CHF474m in 2011 as the Swiss bank acknowledged it was in ongoing discussions with US tax authorities on its now closed cross-border services to US clients.
In his business update to the 2011 results, CEO Boris Collardi said Julius Baer has taken a pro-active and cooperative approach to resolving the US tax situation and will continue to cooperate fully with the US authorities.
Julius Baer shut its US offshore business in 2009.
Julius Baer is one of an estimated 11 Swiss private banks under the scrutiny of the US Department of Justice. US authorities have already charged Baer’s rival Wegelin with helping US taxpayers hide more than $1.2bn.
The Zurich-based bank’s net profit also dropped by 21%, impacted by the one-off €50m ($65m) payment to German authorities in April last year that ended a similar investigation on tax evasion.
The ‘pure play’ private bank reported flat assets under management figures ending the year at CHF170bn, largely unchanged from the end of 2010.
Currency fluctuations and market performance chipped away at the benefits brought by an increase in net new money flows, up 6% to CHF10.2bn from CHF8.8bn in 2010.
Emerging markets drive new money inflows
The reported money inflows derived mainly from the growth markets such as Asia, Russia, Eastern Europe, the Middle East and Latin America, the bank said.
Total client assets dropped by 3% to CHF258bn at the end of 2011 as the bank faced a negative market performance and adverse currency developments.
Another cause for concern was its rising cost-income ratio, which has grown steadily from 63% in 2009 and 65% in 2010 to 68% in 2011.
The 2.5% increase is due to higher costs and the foreign currency exposure of the expenditures in Swiss francs, the bank said.