JBARF Julius Baer Gruppe AG (PK)

When Swiss private bank Julius Baer Group (BAER.VX) reports full-year earnings Monday, the numbers are likely to take a backseat as investors look for evidence of how the private bank is coping with mounting pressure from the U.S. in its campaign to track down Americans who cheated on taxes.

Anxious to end the pressure from Washington, the Swiss government has for months been negotiating a sweeping settlement covering all the Swiss banks that may have helped Americans evade taxes. Bern and Washington have been wrangling over details such as the size of any fine and an agreement to hand over thousands of names of secret account holders.

In the absence of an agreement, U.S. authorities have started to target individual banks, such as Credit Suisse (CS) and Wegelin, one of Switzerland's best-known and oldest private banks. Analysts fear that Julius Baer Group (BAER.VX) could be next.

"The situation has turned more severe," said Daniel Senn, head of financial services at advisory and audit firm KPMG. The problem for Swiss banks is that they find themselves between a rock and a hard place, he said. The banks would prefer just to hand over the names and get it over with, but under Swiss law they are required to preserve client confidentiality.

Early last year, the U.S. indicted two current and three former Credit Suisse bankers; they have denied wrongdoing. In July, the U.S. Justice Department notified Credit Suisse that the bank itself was a formal target of a criminal investigation into allegations that it helped U.S. citizens avoid paying U.S. taxes. Responding to pressure from Washington, Credit Suisse said in November it would hand over account information to Swiss authorities to be passed on to the Internal Revenue Service after its own examination of the data.

Washington's campaign intensified in January, when three of Wegelin's private bankers were indicted by the U.S. authorities. Bending to the mounting pressure, Wegelin last Friday sold all its non-U.S. assets to Switzerland's Raiffeisen cooperative retail banking group.

Wegelin's problems arose from the revelation that it and 10 other banks had allegedly welcomed former U.S. offshore customers from UBS AG (UBS), which had been the first bank to become embroiled in a lengthy battle over taxes.

The IRS probe focuses on 11 banks, including Credit Suisse, Julius Baer, Wegelin and several partly state-owned cantonal banks.

A settlement with UBS in 2009 resulted in the handover of account details of more than 4,500 Americans to U.S. tax authorities. The IRS since then has been sifting through those UBS names and came up with enough evidence to target 11 more Swiss banks.

Analysts fear that Zurich-based Julius Baer is particularly vulnerable. The Swiss private bank doesn't have a large U.S. presence like Credit Suisse, nor is it partly government-owned like some of the cantonal banks.

Vontobel and Zuercher Kantonalbank cut their ratings for Julius Baer this week, citing the lingering tax battle among other reasons.

"Following the Wegelin sale of its non-U.S. assets to Raiffeisen to separate this business from the continued negotiations of the bank with the U.S. Department of Justice, the potential risks of the U.S. tax matter have become increasingly clear," said Teresa Nielsen, analyst at Swiss private bank Vontobel.

As the tax issue comes into focus, Julius Baer is unlikely to use its excess cash for takeovers or a share-buyback, preserving it instead as a hedge against a potential fine, she added.

Julius Baer is due to report earnings Feb. 6. Analysts will be focusing on management's comments about the U.S. tax probe rather than on its profit figures, watching for any signs that clients may already have started to respond to the uncertainty by taking their assets elsewhere.

Net profit will probably have fallen, in part due to the strong Swiss franc, which pressures the value of dollar and euro assets, and corresponding revenue. Julius Baer derives around two-thirds of its revenue from assets in foreign currencies, but incurs around two-thirds of costs in Swiss francs.

The average estimate of 15 brokers polled by FactSet calls for a 22% decline in net profit to 392 million Swiss francs ($429 million) from CHF504 million for the year ending Dec. 31.

-By Anita Greil, Dow Jones Newswires; +41 43 443 8044 ; anita.greil@dowjones.com

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