Results were a mixed bag for the Zurich-listed standalone private banking group: rising AuM, net new money but also a rise in costs and a sharp dent to its net profit attributable to shareholders. The bank is cutting costs and is shutting its Bahamas booking centre.

Julius Baer yesterday reported a 12 per cent rise in assets under management in 2019 from a year earlier, standing at SFr426 billion ($440.9 billion) and driven partly by a SFr10.6 billion (or 2.8 per cent) rise in net new money. 

The Zurich-listed bank said that its net profit attributable to shareholders stood at SFr465 million, falling by more than a third (37 per cent). At the same time it announced targets for 2020-2022, including a SFr200 million cut in its cost base, and measures to simplify its organisation. The change will include closing its booking centre in the Bahamas.

The statement did not specify specific job cuts or other adjustments that might be involved. 

Net new money inflow was hampered by outflows at Italian asset and wealth management subsidiary Kairos, following underperformance in its funds in 2018 and a number of management departures in 2019. Excluding the Kairos situation, net inflows for the group developed at a net new money growth rate of 4.1 per cent, the firm said in a statement.

Net commission and fee income grew by 1 per cent to SFr1.923 billion. This was driven by a modest increase in advisory and management fees, partly offset by a decline in brokerage commissions and income from securities underwriting following a moderate year-on-year decrease in client transaction volumes, the bank continued. 

Operating costs rose by 14 per cent when measured by IFRS standards, standing at SFr2.817 billion. The rise was driven by a 24 per cent increase in general costs to SFr851 million, a 225 per cent rise in amortisation and impairment of intangible assets to SFr168 million, a 10 per cent rise in amortisation of customer relationships to SFr81 million, and a 160 per cent rise in depreciation of property and equipment to SFr100 million. Personnel expenses dipped by SFr5 million, to SFr1.616 billion. 

The adjusted cost/income ratio (which excludes adjusted provisions and losses) was 71 per cent, unchanged from the level in 2018.

Targets
Yesterday the bank also set out new medium targets (2020-2022), such as an adjusted pre-tax margin of 25 to 28 basis points by 2022; an adjusted cost/income ratio of 67 per cent or lower by 2022, and more than 10 per cent annual growth in adjusted pre-tax profit over the medium-term cycle.

“With the successful growth strategy of the past decade, Julius Baer has defined pure wealth management. In the next decade, we aim to become the most reputable and admired wealth manager in the industry. To achieve this, we need to dynamically modernise our organisation. We will sharpen our value proposition for high net worth and ultra-high net-worth clients,” Philipp Rickenbacher, CEO of Julius Baer, said.

The firm said it will offer two client segments, HNWI and UHNWI - “a sharpened, distinct value proposition”. 

“Contrary to industry trends, HNW individuals will continue to be served in a personal way, with a dedicated relationship manager. They will be offered an unrivalled breadth of solutions that can be customised based on technology, supporting scalability. UHNWI and wealthy families will benefit from Julius Baer’s global coverage, full access to its expertise and the ability to deliver highly bespoke solutions, based on the Group’s open product architecture and its balance sheet, without the conflict of other lines of business,” the firm continued. 

The bank said it will speed up investments in technology to power human advice, increasing by about 20 per cent in 2020 and 2021. The impact of the programme will start to materialise in 2021 and will be fully realised by 2022, it said.