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LatAm tax amnesties continue to hit Swiss banks as EFG sees $700m in outflows

LatAm tax amnesties continue to hit Swiss banks as EFG sees $700m in outflows

Latin America’s tax amnesties continue to plague Swiss banks as EFG International is the latest to report outflows of nearly $700 million in 2016, according to its 2016 financial results.

The Zurich-based bank took in 500 million Swiss francs in net new assets over the year, a significant drop from the 2.4 billion Swiss francs recorded in 2015, which the group said reflected market pressures in Asia and the Americas in the second half of 2016.

The Americas region experienced 700 million Swiss francs ($694m) in outflows over the year, ‘driven by continued difficult market conditions and tax amnesty programs during the period’, it added.

Overall, EFG International recorded a net profit of 339.3 million Swiss francs ($335m), which was underpinned by the acquisition of BSI.  EFG’s standalone underlying net profit was 91.1 million Swiss francs ($90.5m).

EFG’s Americas private banking and wealth management business, which has $11.5 billion in assets under management, reported a pre-tax loss of 30.5 million Swiss francs ($30.3m).

Tax amnesty programs in Chile, Brazil and Argentina, as well as changes to income Swiss secrecy laws, have caused Latin Americans to withdraw their wealth from Swiss banks.

Fellow Swiss group UBS reported outflows of $7 billion from its wealth management unit in its fourth quarter results, while Credit Suisse saw outflows of nearly $5.7 billion over the same period.

Fight over BSI price

The group is also gearing up to challenge Brazil’s BTG Pactual over the value of BSI Bank, as it’s looking to cut the purchase price by more than a quarter.

It said it would mark down the price by another 277.5 million Swiss francs. EFG had already lowered the deal price in November to 1.06 billion Swiss francs from 1.3 billion when the deal was announced in February 2016.

In full-year results on Wednesday it said it now expects the purchase price to come in at 783.9 million Swiss francs ($834m).

The bank said: 'EFG’s valuation is subject to BTG’s expected objection and, if necessary, verification by an independent expert.'

The agreement between the two banks was made before a number of revelations about BSI’s role in a corruption scandal surrounding Malaysian state fund IMDB in May 2016, which resulted in billions in client withdrawals.

This has meant EFG has taken on fewer assets than hoped for when the deal was agreed.

BTG had only finalized its acquisition of BSI from Italian insurer Generali in September 2015 for about $1.7 billion.

It had to quickly sell the group after the Brazilian group’s chief executive Andre Esteves was arrested for alleged links to a corruption scandal, damaging investor confidence. Esteves has been subsequently released.

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