ANTIQUES SHOPS

A new report said the global personal wealth of people with $1 million and more to invest fell in 2011 for the second time in four years, reflecting the euro zone crisis and economic sluggishness in developed markets. But several emerging markets also felt pain, as the number of millionaires in India and Hong Kong fell by almost one-fifth.

And with Europe's debt crisis still in full throttle, the outlook for wealth creation in 2012 remains dim, according to Capgemini and RBC Wealth Management's latest world wealth report.

The world's population of millionaires grew by 0.8 percent to a record 11 million, according to the report, yet their collective wealth fell by 1.7 percent to $42 trillion. Every region except the Middle East saw declines in wealth. It was the first global drop in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell by 15 percent and their wealth contracted by 20 percent.

Families with $30 million or more to invest saw their combined wealth fall 4.9 percent and their ranks shrink by 2.5 percent to 100,000 people. This decrease reflects their holdings in higher-risk and less liquid investments like hedge funds, private equity and real estate.

Sinking stocks, slowing exports and slumping currencies hit some countries especially hard. India saw its ranks of millionaires fall by 27,500, or 18 percent to 125,500 last year, reflecting a one-third decline in stock market values and a weakening rupee. Hong Kong's millionaire population fell by 17.4 percent as euro zone woes weighed on its own growth.

Last year was the first time India's wealthy declined in population since 2008, when their ranks fell by 32 percent amid falling stock prices and lower global demand for goods and services, according to Capgemini.

"It was a challenging environment for our clients," George Lewis, global head of wealth management at Royal Bank of Canada , said in an interview.

The Toronto banking giant, one of the world's ten largest wealth managers, took over sponsorship of the widely watched report last month from Bank of America's U.S. brokerage unit Merrill Lynch.

Lewis noted the number of high net worth individuals rose even as overall wealth decreased.

"It at least suggests there continues to be upward mobility and the ability to generate wealth around the world," he said.

CHINA'S GROWING WEALTH

China's population of those with at least $1 million to invest rose by 5.2 percent to 562,400 last year. Japan's millionaires increased by 4.8 percent.

Last year was tough on investors, who were buffeted by a tsunami in Japan, a downgrade of U.S. sovereign debt, political unrest in the Middle East and North Africa and waning confidence in governments struggling to stimulate growth. And weakness in developed markets slowed growth in export economies in Asia and Latin America.

Poland and Singapore, though far apart on the globe, both suffered from the euro zone crisis. Poland, as foreign investment fell, saw its number of millionaires fall 7.8 percent while those in Singapore dropped 7.3 percent, reflecting lower demand for exports.

In 2009 and 2010, people worldwide with at least $1 million to invest saw their combined wealth surge by double digits.

Capgemini's report tracks financial assets but excludes an individual's primary residence, collectibles, consumables and consumer durables.

Millionaire wealth in the United States and Canada in 2011 fell 2.3 percent to $11.4 trillion - still the wealthiest region by this measure - though it had 1.1 percent fewer millionaires, slipping by about 39,000 to a total of 3.35 million.

Strong economic growth in China and other markets increased the ranks of millionaires across the Asia-Pacific region by 1.6 percent to a total of 3.37 million, as Asia vaulted past North America as home to the most millionaires.

Even so, overall wealth in the Asia-Pacific region slipped 1.1 percent to $10.7 trillion, as key markets such as Hong Kong and India lost ground.

Surprisingly, Europe increased its millionaire ranks by 1.1 percent last year, for a total of 3.2 million, while combined wealth fell 1.1 percent to $10.1 trillion. The report also said Europeans invest more of their wealth overseas, reducing their exposure to domestic markets.

The outlier in terms of shrinking wealth was the Middle East, where civil unrest that shook up equity markets worldwide led to surging oil prices and 3.1 percent economic growth. The region's millionaire ranks rose 2.7 percent to 450,000, and that group increased their wealth by 0.7 percent to $1.7 trillion.

The report cautioned that 2012 so far has remained challenging for investors. Concerns about China's growth rate, signs of further contraction in mature markets and the uncertainty stemming from elections and financial policy decisions also may weigh on 2012 performance, he said.

"Repeated flare-ups are likely to keep markets on edge," said Jean Lassignardie, a vice president at Capgemini Global Financial Services.

The report, now in its 16th year, does not delve into asset-allocation decisions made by wealthy investors as it has in the past, because that data was based on interviews with Merrill Lynch advisers. Merrill was the original bank sponsor Of the survey.

* Business seen worth $1.5 bln to $2 bln

* Royal Bank of Canada, Credit Suisse also interested

* Biggest deal since 2010 as private banking in upheaval

* Baer shares up 1.7 pct, outperform sector (Adds background, analyst comment)

By Emma Thomasson

ZURICH, June 19 (Reuters) - Julius Baer is in talks with Bank of America about buying Merrill Lynch's non-U.S. wealth management unit, valued at up to $2 billion, in what would be a transformative deal for the acquisition-hungry Swiss private bank.

Consolidation in the wealth management industry has been a major theme since the 2008 financial crisis, as an increase in costs and regulation force some players to sell off units and others - like Baer - to seek to improve margins through scale.

"Given the early stage of these discussions, the outcome is entirely open," Baer said on Tuesday.

A spokesman declined to say whether Baer was interested in buying the whole business or parts of it. Sources told Reuters last month it was keen on units in Europe, the Middle East, Latin America and Asia excluding Japan.

A deal would be the biggest in the sector since Dutch group ING sold its private banking assets in 2010 to Julius Baer and Singaporean group Oversea-Chinese Banking Corp for a total of about $1.9 billion.

"For Julius Baer this would be a truly transitional deal, similar to the acquisition of the UBS private bank entities back in 2005," said Sarasin analyst Rainer Skierka.

The purchase of UBS-owned assets in 2005 marked the start of a major expansion and the end of majority control for the Baer family which established the bank in 1890.

If Baer were to buy the business outright, it would increase assets under management by about 50 percent from the 178 billion Swiss francs ($186 billion) the bank reported at end-April.

Skierka said a deal could boost Baer's Asian assets under management to 25 percent from 15 percent of the total now, in line with the bank's strategy to expand in the region where the number of millionaires is booming.

Vontobel analyst Teresa Nielsen said the deal could also increase the scale of Baer's European onshore business.

Like many Swiss banks, Julius Baer is keen to grow its presence onshore in Europe and offshore in Asia as the business of serving Western foreigners with secret accounts has come under pressure from a global clampdown on tax evasion.

Julius Baer has been on the prowl since it missed out in November on a majority stake in Swiss group Sarasin, which went to Brazilian-Swiss private bank Safra for $1.1 billion.

CNBC had reported on Monday that Julius Baer was close to a deal to buy the BofA unit.

"MASS AFFLUENT"

Reuters reported in April that BofA had put its wealth management unit outside the United States up for sale as the business, which manages $90 billion for rich clients, was not large enough to generate sufficient income.

Credit Suisse and Royal Bank of Canada were among those who put in initial bids to buy the business, sources told Reuters last month.

Nielsen and Skierka both estimated Baer had about 1 billion francs excess capital, so would probably have to issue new shares to fund at least part of the deal.

"Given its excess capital of 1 billion francs and expected cost synergies, financing of a reasonable purchase price via capital increase should become accretive," said Skierka.

Baer shares were up 1.7 percent at 33.08 francs at 1027 GMT, beating a 0.6 percent firmer European banking sector.

"Questions still remain around the quality of the AUM for sale, its cost income ratio and profitability. We believe the acquisition could lead to high execution risk due to differences between Swiss and American cultures," Vontobel's Nielsen said.

The BoA business targets so-called "mass affluent" clients with hundreds of thousands of dollars, rather than super-rich private banking clients worth tens of millions, but it has failed to match the scale and profitability of its home market.

Bank of America has been selling off non-core business units to build capital. The second-largest U.S. bank by assets has trailed rivals in recovering from the financial crisis, largely because of huge losses and lawsuits tied to its 2008 acquisition of subprime mortgage lender Countrywide Financial. ($1 = 0.9547 Swiss franc) (Reporting by Emma Thomasson; Editing by Dan Lalor)