It is difficult to gauge exactly what Julius Bear is up to. Yesterday at its annual general meeting in Zurich, the chairman of the bank, Ray...

It is difficult to gauge exactly what Julius Bear is up to. Yesterday at its annual general meeting in Zurich, the chairman of the bank, Raymond Baer more than hinted that an acquisition of a private bank was a distinct possibility. And a recent brokerage report from Merrill Lynch sees the bank unveiling a private banking acquisition this year. Hold on a minute, wasn’t Julius Baer more likely to be the acquired rather than the acquirer? A recent weighty article in the US magazine Business Week on the bank was entitled: “Julius Baer May Be Takeover Bait”. No ambivalence there! And for much of the last three years there has been a constant hum around takeover rumours towards the bank. There have been certainly interested parties. HSBC is known to have done a certain amount of sniffing around Baer last year. One can only assume that if HSBC looked at acquiring Baer, so to did many of the other large financial services institutions—UBS no doubt, and may be even Credit Suisse. But let’s look at what Mr Baer said yesterday. Speaking about the tough environment the bank has to operate in, the chairman said: “At the same time, the competition in private banking has become challenging for Switzerland in general and for a Swiss private bank in particular. “Against this backdrop, the board of directors has formulated the following strategic priorities for the group: 1. Profitable organic growth and – whenever an appropriate opportunity arises – growth through value-adding acquisitions 2. Improvement of efficiency in existing business operations as a key ongoing mission.” Much of the rest of Mr Baer’s speech was couched in terms of the bank entering a new phase, but adhering to the values that have served it so well in the past. It appears that Julius Baer is setting down the path towards an acquisition. But this does not look like an acquisition based on strength, but rather more likely to be about survival. As one analyst WealthBriefing spoke to yesterday said: “Assets under management are growing, but for the institutional business, not private banking—and Julius Baer is a private banking brand, not an institutional asset manager.” The dilemma for Baer is that it has to acquire its way out of its current predicament, which is one where offshore private banking revenues are shrinking, particularly for mid-sized asset managers like itself. Maybe Raymond Baer and chief executive Walter Knabenhans have been in talks with the likes of HSBC et al, and nothing has come out of this. So the only logical step for the bank is to go on the offensive and acquire a private bank around which a major onshore wealth management business can be built up. But where? A logical view would point to Germany, where Baer has been adding private banking resources in recent years. And the bank’s temperament, being based in Zurich, might suggest this is its natural hunting ground. Yet, Baer is not that simple to read as past developments have shown. Expect something with a twist when it eventually happens.