May 18, 2017 / 2:35 PM / a year ago

Julius Baer eyes minority stake in Argentina's TPCG -source

* Julius Baer in talks to buy a fifth of TPCG - source

* Part of Julius Baer’s efforts to expand in Latin America

* Acquisition could mirror similar deals in Mexico, Brazil

* Further Argentinian expansion could hinge on new law

By Joshua Franklin and Luc Cohen

ZURICH/BUENOS AIRES, May 18 (Reuters) - Julius Baer is in advanced talks to buy a minority stake in Argentinian financial services firm TPCG Group, a source familiar with the matter said, as the Swiss bank lays the groundwork for further expansion in Latin America.

Baer, Switzerland’s third-biggest private bank behind UBS and Credit Suisse, wants to purchase a roughly 20 percent stake in TPCG, the source said, speaking on condition of anonymity because the talks are not public.

The deal could be announced as early as next week, although it is not certain it will go through. Zurich-based Baer is due to publish a four-month interim management statement on Monday.

Under the proposed agreement Baer would have the option to buy a bigger stake over time, the source said.

The deal would be priced at 1-2 percent of Buenos Aires-based TPCG’s assets under management, a typical rule of thumb in private banking purchases.

Representatives for Baer and TPCG declined comment.

The purchase is a financial investment but could eventually mirror a 2011 deal when Baer initially bought a minority stake of Brazil’s GPS Investimentos Financeiros e Participações S.A. and raised it to a majority in 2014. It also bought a minority stake in NSC Asesores in Mexico in 2015.

However, further expansion in Argentina hinges on whether President Mauricio Macri succeeds in rolling back rules blocking foreign wealth managers from working in the country and banking its commodities and cattle millionaires.

Baer now covers Argentina from an office in neighbouring Uruguay, a business it inherited from a 2012 acquisition of Merrill Lynch’s international wealth management division.

Merrill was one of several institutions that closed its private banking business in Argentina during the populist administration of Cristina Fernandez, whose currency controls and meddling in the economy made business difficult for multinational companies, including banks, operating there.

Macri, on Argentina’s centre-right, has instituted a number of market-friendly reforms designed to normalise economic policy and attract investment since taking office in December 2015.

For private banks, the key legislation is a capital markets reform bill that would, among other changes, allow licensed investment advisers and intermediaries to invest Argentine citizens’ funds in overseas assets.

“If there was that change in legislation, I think that’s certainly a market that we would be looking into,” Baer Chief Executive Boris Collardi had told Reuters in February after the bank reported full-year results.

Finance Minister Luis Caputo told Reuters last month he was confident the capital markets reform legislation would pass congress this year.

The outcome of legislative elections in October could determine whether Macri succeeds in passing his bill. (Additional reporting by Walter Bianchi in Buenos Aires; Editing by Michael Shields)

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