Julius Baer New Money Disappoints

Due to continued slow momentum in Eastern Europe, Latin America and some client deleveraging in Asia, Julius Baer's net inflows declined below 3 percent. The bank's target is 4 to 6 percent. 

At the end of April 2016, Julius Baer Group’s assets under management (AuM) amounted to a record 305 billion Swiss francs, an increase since the end of 2015 of 6 billion, or 2 percent.

The year-to-date development of Group AuM benefitted from continued net new money and the first-time consolidation – as at 1 April 2016 – of Kairos Investment Management with close to 9 billion francs of AuM, as the Swiss bank reported on Thursday.

Negative Currency Impact

These positive contributions were partly offset by a negative currency impact, mainly due to the weakening of the dollar and the British pound relative to the Swiss franc.

Partly owing to the continued slow momentum in Eastern Europe and Latin America, some client deleveraging in Asia, as well as the tail end of the regularisation of legacy assets in France and Italy, net inflows declined – on an annualised basis – to below 3 percent.

Substantial Acceleration of the Hiring Pace

However, particularly in light of the success so far this year in attracting relationship managers (RM) as well as the strong current hiring pipeline, the Group believes that the 4 to 6 percent net new money target range remains achievable.

In the first four months the Group has, through hiring, already realised a net increase of over 30 RMs. This represents a substantial acceleration of the hiring pace compared to recent years.

Asian Franchise Attractive

This organic expansion was spread over a number of different regions including Asia, where under the new leadership of Jimmy Lee the business is being reorganised in order to be well positioned for the next phase of growth.

In the year to date, the Asian franchise was successful in attracting a number of experienced new market heads and teams of RMs. The significant hiring successes and the potential for additional hiring in the near term considerably strengthen the Group’s potential for further sustainable asset growth in the medium and long term.

Moderate Recovery in Gross Margin

Including a positive fair value adjustment of 39 million francs resulting from the recent acquisition of an additional 60.1 percent stake in Kairos, the gross margin over the first four months was 95 basis points (bps). Excluding this adjustment, the gross margin recovered to 91 bps, an increase of 3 bps from the 88 bps in the second half of last year. This increase was driven mainly by a modest improvement in client trading compared to the last six months of 2015.

As a result of the strategic decision to invest in accelerating RM hiring as well as strengthening other key areas of the business, the cost/income ratio for the first four months of 2016 ended moderately above the 64 to 68 percent range that was recently set as a new target for the medium term. The investments in RM hiring are likely to continue well into the remainder of the year.

Modest Recovery

However, at the same time, considering the only modest recovery in the underlying gross margin and the further strengthening of the Swiss franc against certain key currencies, the Group has defined and already partly implemented a number of cost saving measures throughout the organisation.

These measures will in the remainder of the year save approximately 50 million francs relative to earlier budgeted costs and are expected to bring the 2016 full-year cost/income ratio very close to the medium-term target (assuming no further significant deterioration in market conditions and currency developments from current levels).

Julius Baer Group’s detailed financial results for the first half of 2016 will be published on 25 July 2016.


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