UPDATE 2-Julius Baer to cut 1,000 jobs after Merrill deal

* To shed 15-18 pct of combined staff of some 5,700

* Targets combined cost-income ratio of about 70 pct

* Baer AuM rise to 184 bln at end August

* Sees deal closing by first quarter 2013

(Adds detail on job cuts, analyst comment, shares)

By Emma Thomasson ZURICH, Oct 9 (Reuters) - Swiss private bank Julius Baer

will cut up to around 1,000 jobs as it seeks to reinin costs following its purchase of Bank of America MerrillLynch's international wealth management business.

Baer said it planned a "significant reduction" of Bank ofAmerica positions not required after the merger as well as cutsto middle and back office functions of the melded group,reducing the combined staff of about 5,700 by 15-18 percent.

A Julius Baer spokesman said the job cuts would largely hitthe Bank of America unit, which has 2,100 staff now, and t heywo uld be spread geographically and take place gradually afterthe deal closes, currently expected for the first quarter of2013.

Baer said in August it was acquiring Merrill Lynch's wealthmanagement business outside of the United States and Japan toexpand in fast-growing emerging markets. It is presentingdetails of the deal to analysts and investors in London later onTuesday.

Ahead of that meeting, Baer reported that its assets undermanagement (AuM) rose to 184 billion Swiss francs ($197.11billion) at the end of August from 179 billion at end June.

The bank said the increase resulted from net new moneyinflows close to the top end of its medium term target range, apositive market performance and a positive currency impact,mainly due to the strengthening of the dollar.

The gross margin was slightly lower than the 98 basis pointsreported for the first six months and the cost income ratioslightly higher due to a small contraction in client activityover the summer.

Baer said the business it is acquiring made a loss of $30.4million in the first half but would have been profitable whenadjusted for co st r e ductions e xpected to result from the me rger.

"Julius Baer will have to work hard to quickly change the( takeover) t arget so it can generate t hese profits, " said Kepleranalyst Dirk Becker, reiterating his 'hold' on the stock.

Bank of America 's p rivate banking business outside theUnited States h as been scattered over many countries, making itdifficult to bu ild up t he sc ale, and profitability, of it s homemarket.

Baer shares were down 0.4 1 percent at 32. 25 francs at 0 833GMT, compared to a 0.3 percent weaker European banking sectorindex .


Baer launched a rights issue on Monday to help pay for thedeal, seeking to raise 492 million francs. Shareholderopposition forced it to cut the size of the rights issue from aninitially planned 750 million francs. .

Sarasin analyst David Kaegi reiterated his support for thedeal, noting the Merrill Lynch business targeted the sameclients as Baer and had significant exposure to growth markets.

"We therefore reiterate our 'buy' rating but still expectsome volatility due to execution risk going forward," he said.

Baer has said it needs a total of 1.47 billion francs forthe deal, including some 312 million for transaction,restructuring and integration costs. It said Bank of Americawould also contribute $125 million towards redundancy payments.

It has said the deal should add 57-72 billion francs inassets, although the actual amount transferred could vary due toclient attrition and market performance during the integration.

Baer said the planned cost cuts should lead to a impliedcost-income ratio of about 70 percent and a pre-tax profitmargin of about 25 basis points for the acquired business onJulius Baer's platform in 2015.

It expects the transaction will be at least earnings pershare neutral in 2014 and contribute 15 percent to EPS in 2015.

($1 = 0.9335 Swiss francs)

(Additional reporting by Oliver Hirt; Editing by David Cowelland Hans-Juergen Peters)

((+41 58 306 7311)(Reuters Messaging:emma.thomasson.thomsonreuters.com@reuters.net))