After strong performance in 2014, the Swiss firm said a mix of forces created headwinds for its results in the first six months of this year.

Switzerland-listed EFG International today reported a 12 per cent year-on-year drop in underlying net profit, at SFr51 million ($52.9 million) in the first six months of 2015, as the firm extended its withdrawal from some lending activity and due to more difficult market conditions in the second quarter of the year.

Operating income was SFr353.0 million, up 3 per cent from a year earlier. The revenue margin was 87 basis points in the first half of the year, compared with 88 bps in the first half of last year. Operating expenses increased 7 per cent year-on-year to SFr296.0 million, reflecting investments in growth.

“During the first half of 2015, EFG International did not build on the strong progress achieved in 2014 (particularly during the second half) as it had anticipated. This reflects a number of factors. The policy decision to exit certain non-strategic lending business was extended, addressing situations where lending was not sufficiently part of an overall private banking relationship and/or pricing was inadequate. In addition, pronounced economic and market uncertainty in the eurozone, Brazil and China had an impact on client activity levels, particularly in the latter part of the period. Consequently, the second quarter was weaker than the first,” the firm said in a statement.

The cost-income ratio was 83.3 per cent in the first half of 2015 (80.2 per cent in the first half of 2014).

Revenue-generating assets under management were SFr80.2 billion, down from SFr84.2 billion at end-2014, due to a combination of lower lending and the strong Swiss franc.

There was a decline in net new assets of SFr300 million compared with a net new inflow of SFR2.7 billion a year earlier. The number of client relationship officers stood at 444 at end-June 2015, from 440 at end-2014. Some 36 new CROs were added and a further 24 CROs are contracted to join in the second half.

The Basel III BIS-EU capital ratio stood at 17.8 per cent on account of higher risk-weighted assets due to regulatory changes.

The firm said “various measures” will be undertaken to reduce costs, with the aim of realising EFG International’s target cost-income ratio of 75 per cent.

“To ensure a more collective and performance-orientated approach, a new management board will be formed, including all regional business heads,” the firm said.

“I am keen to get to SFr100 billion in AuM as quickly as possible. However, strengths are only meaningful if they are converted into results, and this was not the case during the first half. I am confident this is not an accurate reflection of what the underlying business is capable of – portfolio adjustments on the lending side, external factors, and inevitable distractions conspired to depress performance,” Joachim Straehle, chief executive, said.

“The underlying business has to do significantly better. I have made organisational changes to ensure that people are focusing on the right things; the business needs to be more rigorous on the cost side; performance management needs to be more robust; and we must walk the talk in delivering growth. Make no mistake: I am absolutely committed to delivering strong, profitable growth and ensuring that EFG International delivers on its full potential. For me, the latter means EFG International being among the leading private banks when it comes to growth in both AuM and profits,” he added.