(Bloomberg) -- Julius Baer Group Ltd. is exploring a potential acquisition of rival Swiss private bank EFG International AG, people with knowledge of the matter said. 

Zurich-based Julius Baer has held preliminary discussions with EFG in recent weeks about the possibility of a combination, according to the people, who asked not to be identified because the information is private. Shares of EFG were up 1.2% in Friday trading, giving the firm a market value of 3.8 billion Swiss francs ($4.2 billion).

A deal between the two banks would create a wealth manager with more than 500 billion francs in assets under management. It would continue the transformation of the Swiss financial industry that was kicked off last year when the country’s largest bank, UBS Group AG, bought rival Credit Suisse in an emergency takeover. 

EFG’s largest shareholder is the billionaire Latsis family, which made its fortune from the Greek shipping industry. The family’s EFG Bank European Financial Group has around a 45% stake in the wealth manager. 

Any transaction would add to the $45 billion of takeovers announced in the banking industry globally this year, according to data compiled by Bloomberg. Talks have been on and off, and there’s no certainty they will result in a transaction, the people said. 

Representatives for Julius Baer and EFG declined to comment. 

Other major shareholders in EFG include Brazil’s Banco BTG Pactual SA, with around a 20% stake, and Boris Collardi, the former chief executive officer of Julius Baer. Collardi became a member of EFG’s board in 2022 after his sudden departure from a role at Banque Pictet & Cie.

EFG, which had assets under management of about 142 billion Swiss francs at the end of 2023, reported its highest profit ever last year, while warning that a boost to net interest income from higher interest rates is likely to reverse. 

Julius Baer is looking for a new CEO following the departure of Philipp Rickenbacher. He stepped down as a consequence of the bank’s exposure to the Signa property empire — something that led to 586 million Swiss francs of losses on loans. 

The lender is seeking to step up growth as it tries to draw a line under the turmoil caused by the Signa writedown. As part of that effort, it has planned to tweak its bonus system to attract more client money, Bloomberg reported in March.

On Thursday, the bank said client fund inflows have recovered since a negative start to the year. Assets under management rose by 10% in the first four months of 2024, driven by a significant positive currency impact and by strong stock markets, it said.

Julius Baer is also still subject to multiple investigations by Swiss financial regulator Finma, which could complicate any larger transactions. 

Read: Julius Baer Hits Reboot to Escape Swiss Banking’s New Malaise

The Betaville blog wrote this month that EFG was the subject of takeover speculation, citing market gossip.

--With assistance from Myriam Balezou and Pamela Barbaglia.

(Updates with industry deal volume in fifth paragraph. An earlier version of the story was corrected to add dropped word in market value in second paragraph.)

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