March 15, 2017 / 7:57 AM / a year ago

UPDATE 1-EFG expects fight with BTG Pactual over final BSI price

* FY net profit 339.3 mln Sfr

* Boosted by expected lower price for BSI of 783.9 mln Sfr

* Proposes steady 0.25 Sfr/share dividend

* End-2016 assets under management 144.5 bln Sfr (Recasts, adds CEO quote)

By Joshua Franklin

ZURICH, March 15 (Reuters) - EFG International is gearing up for a battle with Brazil’s Grupo BTG Pactual SA over the value of BSI Bank, with the Swiss private bank now expecting to cut the purchase price by more than a quarter.

It said on Wednesday it would mark down the price by another 277.5 million Swiss francs ($275.3 million).

EFG’s acquisition of Swiss rival BSI from BTG Pactual last year helped it almost double in size, making it one of Switzerland’s 10 biggest private banks behind the likes of UBS , Credit Suisse and Julius Baer.

However, the deal has been complicated by BSI’s legal troubles which included dealings with scandal-hit Malaysian government fund 1Malaysia Development Bhd (1MDB) and resulted in billions in client withdrawals.

This has meant EFG has taken on fewer assets than hoped for when the deal was agreed, with the bank’s assets under management falling to 144.5 billion francs at the end of 2016 compared to the predicted total of around 170 billion francs.

EFG had already lowered the deal price in November to 1.06 billion francs from 1.3 billion when the deal was announced. In full-year results on Wednesday it said it now expects the purchase price to come in at 783.9 million francs

The bank cautioned this was “subject to BTG’s expected objection and, if necessary, verification by an independent expert”.

The lower price helped Zurich-based EFG post 2016 net profit of 339.3 million francs, far ahead of the average estimate of 13.8 million in a Reuters survey of four analysts.

The bank said underlying net profit which excludes one-off items was 82.3 million francs, down from 91.1 million in 2015.

BSI also suffered net outflows of 4.9 billion francs in November and December 2016, resulting in total net withdrawals in 2016 of 5.4 billion francs for EFG, the bank said.

“From our perspective, the outflows at BSI are surprisingly large at CHF 4.9 billion during only two months of 2016,” Helvea analyst Tomasz Grzelak, who rates the stock “hold”, wrote in a note.

Zurich-based EFG, whose largest shareholder is Greece’s Latsis family, proposed an unchanged dividend for 2016 of 0.25 francs per share, matching the median survey estimate.

“Our priority for the coming years is to fully realise the potential of this transformational business combination for the benefit of our clients, shareholders and employees,” EFG Chief Executive Joachim Straehle said in a statement.

$1 = 1.0080 Swiss francs Reporting by Joshua Franklin; Editing by John Miller and Michael Shields

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