EFG International: The Agreement Beyond the Initial Deal

In recent weeks, there has been enthusiastic, perhaps overly optimistic, speculation about a potential takeover of the Swiss private bank EFG International by its competitor Julius Baer. However, financial industry experts attending the Private Banking Day in Geneva on Tuesday now unanimously agree that any deal is “dead.” The primary reason is the price.

EFG International, controlled by the Greek-Swiss Latsis shipping family, is in a robust position. Its stock price has surged by 70 percent over the past two years, making it unlikely that they would accept an undervalued offer. Moreover, Julius Baer is grappling with its own challenges, including the aftermath of a credit debacle involving Austrian investor René Benko. This situation led to the resignation of their CEO Philipp Rickenbacher last February, necessitating the appointment of a new leader.

Rumors of a New Suitor: J. Safra Sarasin

Despite the failed deal with Julius Baer, speculation about another potential suitor has emerged. Industry insiders in Geneva hinted at interest from J. Safra Sarasin. When questioned about this new rumor, both institutions remained silent. The Brazilian-Swiss financial institution, known for its success and secrecy, is believed to be a potential player.

The Brazilian family that owns J. Safra Sarasin is known for retaining a large portion of the bank’s annual profits to build a war chest. Juerg Haller, the bank’s chairman, has emphasized the institution’s role as a consolidator in the industry, a point he reiterated in an April interview with finews.ch (German only).

Strategic Moves and Financial Strength

J. Safra Sarasin has recently made headlines by recruiting former Credit Suisse bankers to expand its investment banking services for wealthy clients. A notable example of their strategic approach is the acquisition of Basel’s Bank Sarasin over twelve years ago, where J. Safra won a bidding war against Julius Baer, Raiffeisen, and Apax Partners by agreeing to pay in cash, showcasing their financial strength and determination.

Creating a New Heavyweight

A potential merger between J. Safra Sarasin and EFG International would create a significant new player in the Swiss banking landscape. Combined, they would manage approximately 360 billion francs in client assets, placing them ahead of Geneva’s Lombard Odier, though still behind Pictet. This merger would enhance their presence in Zurich and Lugano (via BSI), where EFG International is prominent, as well as in Basel and Geneva, where J. Safra Sarasin historically dominates.

International Impact and Cultural Synergy

Internationally, the merger would have significant repercussions, particularly in Asia, where both banks have strong franchises. J. Safra Sarasin employs around 2,500 people across more than 30 locations worldwide, overlapping with EFG International’s 40 locations and 3,000 employees. A key integration challenge would be managing EFG International’s relatively independent client advisors, especially since Sarasin maintains tighter control over its client-facing staff.

Interestingly, a merger would see the Brazilians at Sarasin encountering their compatriots from BTG Pactual, the second-largest shareholder of EFG International after the Latsis family. This cultural affinity could potentially facilitate smoother integration.