Swiss-listed EFG International, which has been on a drive to boost profitability and slim down certain operations over the past year, said it logged an underlying net profit of SFr142.5 million ($152.9 million) for 2012, a 71 per cent year-on-year increase, while its operating income rose 8 per cent to SFr824.6 million.

Perhaps just as significantly, the private banking firm’s cost-income ratio fell from 91.6 per cent in 2011 to 79.2 per cent, it said in a statement today.

Revenue-generating assets under management stood at SFr78.7 billion at end-2012, up from SFr78.4 billion a year before; the firm logged net new assets of SFr3 billion, up from SFr600 million.

At the end of last year, EFG International had a BIS capital ratio of 18.1 per cent, up from 12.9 per cent a year before.

The total number of client relationship officers (CROs) stood at 477 at end-2012, compared with 567 a year earlier, it said. The firm said it envisages moving back to a net hiring approach this year after a period of cutbacks.

As part of that return to hiring, the firm said it intended to focus, among other areas, on hiring managers in the ultra high net worth client segment. Overall across the entire firm, however, EFG International said it was maintaining a hiring freeze to keep costs under control.

Improvement

“EFG International’s performance in 2012 was much improved compared to a year earlier on account of the steps taken to reset the business and solid performances from most businesses,” it said.

“EFG International made an IFRS net profit of SFr111.0 million in 2012 (it would have been SFr2.4 million higher if the stake in EFG Financial Products had not been reduced as part of its IPO), compared with a loss of SFr294.1 million a year earlier,” it continued.

“The Swiss business was impacted by outflows and subdued client activity, but all other businesses delivered stronger revenues, with specialist business relating to large clients being a feature throughout the year.” 

The statement said the firm has “now returned to its traditional focus on private banking”, pointing out it has exited from non-private banking businesses, culminating with the recent agreement to sell OnFinance, its Lugano-based financial services boutique, to its management team. The bank also held an initial public offering of EFG Financial Products in October 2012.

There has been a notable cut in staffing as part of the cost reductions. Since September 2011, total headcount, excluding EFG Financial Products, has shrunk by 14 per cent, compared with a reduction targeted in the firm’s business review of 10-15 per cent.

For the same period, the number of private banking CROs was down by 23 per cent compared with a business review objective of 15 per cent. In its business review, EFG International targeted a net profit and loss benefit of SFr35 million, realised in part in 2012 and in full from 2013.

EFG International said that three of its four regional private banking businesses delivered strong performances in 2012 compared with a year earlier. The UK and Asia increased their pre-tax profit contributions by more than 50 per cent and achieved net new asset growth within EFG International’s target range of 5-10 per cent. The Americas also delivered an increase in pre-tax profit contribution of more than 50 per cent.

“The one disappointing area was the Swiss business, which experienced an outflow, only partially offset by inflows from other businesses in Continental Europe. Monaco and Luxembourg both delivered record performances; AyG in Spain increased its contribution notwithstanding a challenging domestic economic backdrop; and all have positive momentum going into 2013. In Switzerland, while costs have been reduced substantially, the focus now is on rediscovering growth, and the business is targeting a significant improvement in profitability in 2013. A number of organisational changes are being made in support of this,” the firm said.

Structural changes

Additionally, the firm said the executive committees of EFG International and EFG Bank are to be aligned. As well as being EFG International’s principal Swiss subsidiary, EFG Bank acts as an operations and IT hub for the entire business.

Furthermore, Asia is a separate geographical business but legally part of EFG Bank, and the Americas uses EFG Bank extensively for booking purposes. Individuals with EFG International functional responsibilities will in future have the same responsibilities for EFG Bank, to boost efficiency and avoid duplication.

Switzerland (plus Liechtenstein) will in future constitute a business in its own right, which the bank said reflected “the industry-wide challenges impacting Switzerland and the scope to improve business performance”. As a result, Continental Europe will in future comprise Luxembourg, Monaco and Spain.

Ludovic Chechin-Laurans will be responsible for private banking in Switzerland. Alain Diriberry will continue to be responsible for Continental Europe, and will additionally assume responsibility for developing the group’s activities in the Central and Eastern European markets, the bank added.