Unique: Julius Baer plans asset administration three way partnership in China
© Reuters. FILE PHOTO: The logo is located at the headquarters of the Swiss private 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 build a business in China in cooperation with a local financial company as part of its strategy to promote growth in Asia, Reuters said with direct knowledge.
Julius Baer wants to found a majority company to tap the rapidly growing prosperity in the world’s second largest economy, and has started looking for a partner, according to the population.
The plan calls for China, the world’s second-largest country by number of billionaires, to quickly open its financial sector to greater foreign participation.
If successful, Julius Baer will be the first major private bank to set up an asset management joint venture in China. This is the first time that the plan to establish an onshore presence is reported.
According to the 2020 Hurun China Rich List released earlier this month, booming stock markets and a host of new listings have spawned five new dollar billionaires in China every week over the past year.
China’s wealth management industry is the fastest growing in the world, but has historically been associated with the sale of high-risk, illiquid investment products and lax supervision.
This made the offshore business – where banks help Chinese clients manage their wealth in locations like Hong Kong, Singapore and Zurich – the preferred route for most global wealth management companies.
However, over the past year, the Chinese authorities have combated dubious practices in the domestic wealth management industry to reduce debt and limit sales of risky products. They have also made it easier for foreigners to set up asset management joint ventures.
Julius Baer, the third largest publicly traded lender in Switzerland, is expected to make a decision on its Chinese partner next year before beginning the formal license application process.
The individuals declined to be identified as the bank’s plans are confidential. A Julius Baer spokesman in Zurich declined to comment on the matter.
An onshore presence in China will significantly strengthen Julius Baer’s position in Asia, where it competes with compatriots UBS Group AG (S 🙂 and Swiss credit Group AG (S 🙂 as well as a large number of other regional and global asset managers.
“Mainland China is always the big prize, of course,” said Julius Baer’s CEO Philipp Rickenbacher at a conference in Zurich last month.
“But we have seen that many companies have lost a lot of money because of their local presence in recent years … Is that impossible? No, and we are working hard to continuously explore these possibilities.”
The business plans for China come as the bank also considers restoring its presence in the US to help its Latin American clients book assets.
The bank has grown rapidly in recent years following acquisitions and lively hiring.
However, a money laundering sanction imposed by the Swiss financial watchdog earlier this year, which prevented Julius Baer from making large and complex acquisitions, as well as a cost-cutting measure initiated last year have made its growth path difficult.
The company has looked for emerging markets and has expanded some of its European operations to create new assets.
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