Julius Baer eyes happy ending to U.S. probe

ZURICH (Reuters) - Julius Baer expressed hopes of striking a mutual accord to end its part in an escalating crackdown on offshore bank accounts amid rising tension among Swiss private bankers following the U.S. indictment of Baer rival Wegelin last week.

"Julius Baer is strongly committed to resolving this situation, and is confident that a mutually satisfactory solution will be found," the bank said as it announced 2011 results and a share buyback on Monday.

The U.S. issue has burdened Baer for months, as U.S. officials pile pressure on Swiss private banks who catered to wealthy Americans with hidden offshore accounts. That culminated in the indictment last week of Wegelin, Switzerland's oldest private bank which had sold itself shortly before.

"We've taken an early, proactive approach with the U.S., taken measures including the US exit in 2009 at our own decision, and have an ongoing constructive dialogue," Julius Baer Chief Executive Boris Collardi told journalists.

"Whether this will end up with us having to pay a fine ... I think it's quite clear in the sense we expect we will probably have to pay a fine, but have the resources to satisfy a solution."

Shares in Julius Baer fell 2.2 percent to 37.03 Swiss francs at 3:30 a.m. ET, underperforming a 0.7 percent softer European Banking sector index.

Larger rival credit Suisse, which reports 2011 numbers later this week, is also caught up in the U.S. investigation. The bank said in November it had taken a 295 million Swiss franc charge against third-quarter earnings in connection with the probe, but that the final settlement could exceed current provisions.

SOARING FRANC CRIMPS PROFIT

Baer said net profit fell 27 percent on the year to 258 million Swiss francs ($280.72 million), as lackluster client trading, restructuring costs and other expenses weighed.

Baer cuts its profit margin and raised its cost income ratio targets as a stubbornly buoyant Swiss franc kept the bank's mainly franc-based costs high but capped its foreign-currency revenues.

"Two-third of costs are in Swiss francs, while two-thirds of revenues are in non-Swiss franc currencies," financial head Dieter Enkelmann said. "We can still work on costs, to move out some costs from Switzerland and to better match costs and revenues, but this is not short term and will take some time."

The bank also launched a new share buyback of up to 500 million Swiss francs after failing to make any big acquisitions during the year. The bank lost out to Swiss-Brazilian Bank Safra in its attempt to buy Bank Sarasin late last year.

After paying 2011 dividends and buying back shares, the bank still has roughly 900 million Swiss francs in excess capital, Enkelmann said.

"The earnings show a favorable trend, but they are under consensus, which was ambitious," said Sarasin analyst Rainer Skierka, who has a buy rating on the bank.

"The uncertainty for Julius Baer linked to the U.S. business is also still there," he said.

Clients added 10 billion francs in net new money in 2011, ahead of expectations, while assets under management remained steady at 170 billion Swiss francs.

($1 = 0.9191 Swiss francs)

(Reporting by Martin de Sa'Pinto; Editing by Hans-Juergen Peters)