Swiss Private Bank Julius Baer Outsources Services

Mandy Robinson, Tax-news.com, London

08 September 2000

Swiss private bank Julius Baer has announced its intentions to outsource its fund administration and custody services, which willl now be provided by the Bank of New York (BoNY). The Zurich-based bank becomes the first Continental financial institution to hand over responsibility for these services to another provider.

Clients will be in experienced hands considering BoNY is a world leader in custody business. The BoNY is the oldest US bank at the grand old age of 216 years, and resides at the very classy address of One Wall Street. It is one of the largest bank holding companies in the US and a major force in world banking. Its custody services and related provisions accounted for nearly 50% of last year's revenues, and the bank intends to invest U$445m in order to expand its international business operations later this year. The bank intends to enter Europe hoping to increase its already considerable assets worth US$6,800bn.

BoNY will base its operation at Julius Baer International in London, which is home to its client asset management branch. The US bank will also provide a similar service for the Royal Bank of Scotland's private banking arm, Coutts. Last year, BoNY purchased the Royal Bank of Scotland's London-based custody business, which will provide the platform for its European expansion and also for the Julius Baer contract.

BoNY's service provision work for Coutts will take place in Ireland in co-operation with the Allied Irish Bank. It will work with assets worth over U$5bn in Coutts investment programmes, its Liquidity Fund and two Irish investment funds.

According to the FT, assets from custody businesses from around the world are valued in excess of $45,000bn, with clients ranging from "giant pension funds and asset managers to wealthy individuals, settling trades and administering their funds." And the market is set to continue its rapid expansion, perhaps as much as 45 per cent over the next three year period, because it is likely that as more institutions offering finanical and investment services grow larger, they too will feel the need to outsource their administrative duties. Analysts expect this to occur particularly in Europe since "the emergence of an equity culture in continental European countries and the expected switch to private pension provision will provide tempting growth opportunities."

Julius Baer is Switzerland's leading independent private bank. Last month it reported an 80 per cent jump in first-half profits and its on-target earnings for the whole of 2000 are set to be well above last year's. Net profits up to June last year amounted to SFr 139m, and this year the first-half profit leaped to SFr 249m. The bank has enjoyed a spectacular increase in its asset management services which has enabled some private clients' earnings to double. Furthermore, assets under management in the first six months rose 14 per cent from last year to SFr146bn, with more than two-thirds as new investments.

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