FIAT DEALERS GARAGES

* Confirms medium-term targets despite missing cost goal

* Shares up 1.1 pct, outperform sector

* CEO calls Italian private bank BSI "an interesting asset" (Adds management, analyst comment; rewrites throughout.)

By Katharina Bart

ZURICH, July 23 (Reuters) - Julius Baer struck a deal with Bank of China to tap new business and has won new money from clients of rival private banks, as it seeks to bulk up to counter slowing growth in offshore Swiss banking under attack from tax authorities.

The Swiss private bank on Monday confirmed targets including annual net new money growth of up to 6 percent - which it exceeded in the first half of the year - after winning funds from rivals such as Sarasin and Credit Suisse's Clariden Leu, which are both facing upheaval.

Sarasin was bought by Brazilian-Swiss private bank Safra last year, and Credit Suisse said it saw 3.4 billion Swiss francs ($3.44 billion) in second-quarter outflows following the integration of boutique subsidiary Clariden Leu.

Julius Baer posted a first-half net profit up 19 percent to 175.5 million Swiss francs ($177.82 million) and net new assets of 5.5 billion francs, beating analyst forecasts, helped by growth markets such as Asia as well as a German onshore operation.

Its shares were up 1.1 percent at 35.07 francs by 1309 GMT, outperforming a 3.9 percent drop in the European banking index and the only Swiss blue-chip in the black.

Julius Baer said it will take on under 1 billion Swiss francs in assets from state-owned Bank of China - one of the country's Big Four banks - which is withdrawing from a four-year foray into Swiss private banking.

The move is part of a strategic partnership to refer clients to each other and give Baer a foothold in China.

"The strategic partnership with BOC offers the potential to gain further access to the Chinese mainland, one of the world's most important and fastest-growing wealth markets," Sarasin analyst Rainer Skierka said in a note.

Bank Vontobel analyst Teresa Nielsen, who rates the stock a hold, also welcomed the deal but cautioned: "It will take time for the partnership to translate into business growth."

EXPANSION AT STEEP PRICE

Since buying four UBS private banks and asset manager GAM in 2005, Julius Baer has poured money into going onshore - or serving clients in their home markets - in growth spots such as Asia, the Middle East and Latin America.

Julius Baer's efforts are a bid to offset slowing growth in traditional offshore Swiss banking, or financial services from Switzerland, which is under attack from foreign tax authorities increasingly cracking down on undeclared funds held in hidden accounts.

Chief Executive Boris Collardi suggested Julius Baer might bid for BSI, a private bank owned by Italian insurer Generali .

He didn't comment on the status of ongoing talks with Bank of American about buying Merrill Lynch's non-U.S. wealth management unit, valued at up to $2 billion.

But although the first-half results were helped by cost cuts, the bank's cost-income ratio of 70.4 percent was well above its target of not more than 66 percent, showing that expanding outside Switzerland comes at a steep price. Onshore operations, particularly in Asia, are far less profitable than offshore banking, according to a study by Boston Consulting Group in May.

"We would not be surprised to see more restructuring activities in the second half," as a result, said Kepler Capital Markets analyst Dirk Becker. He rates the stock at hold. Last year, the bank took a 50 million franc charge to cut 150 jobs among 3,500 staff.

Collardi said Baer sees markets remaining tough through the second half of the year, continuing to hammer client confidence and activity - a key source of private banking revenue.

He expects progress by year end in talks with U.S. justice authorities in a bid to end their probe of the bank over allegations it helped wealthy Americans dodge tax. However, he said U.S. elections in November may complicate negotiations. ($1 = 0.9870 Swiss francs) (Reporting By Katharina Bart; Editing by Erica Bilingham)