The cost of acquiring BSI, some market headwinds and other factors led to a dip in revenues and net profit at the Swiss private banking group in the first half of 2016.

EFG International, in the process of acquiring fellow Swiss private bank BSI, today reported operating income for the first half of 2016 of SFr341.7 million ($343.9 million), down 3 per cent on a year earlier, as banking and commission income dropped amid lower transactional revenues, a move away from risk and less client action. Net profit also fell, while assets under management dipped.

The life insurance portfolios hit performance with revenues of -SFr800,000, compared with a positive revenue contribution of SFr6.9 million in the first half of 2015.

Underlying recurring net profit, excluding life insurance, was SFr38.1 million in the first half of 2016, compared to SFr44.1 million in the first half of 2015. This excludes various non-recurring items, such as SFr6.1 million in costs and provisions relating to acquiring and integrating BSI, and SFr4.5 million spent on legal and other charges. IFRS net profit was SFr22.3 million, compared to SFr48.0 million for the first half of 2015.

The underlying private banking business achieved stable results: core operating income remained flat at SFr318.0 million compared to SFr315.5 million in the previous year. The revenue margin was 84 basis points, slightly better than the margin in the second half of 2015, which was at 83 basis points.

The cost/income ratio of the firm was 86.9 basis points at the end of the half-year period, compared to 83 basis points at end-2015. This figure is some way above the average ratio for the world's top-25 wealth management houses, of 75.1 basis points. For the industry as a whole, the average is around 80 (source: Scorpio Partnership).

Net new asset generation was flat in the first half of 2016, with net assets of SFr100 million, compared to net assets of SFr300 million in the first half of 2015. Net new asset generation was disappointing in the first quarter of 2016, while a positive momentum emerged across most regions towards the end of the second quarter 2016, the firm said.
 
Revenue-generating assets under management were SFr80.6 billion as at the end of the first half of 2016, down from SFr83.3 billion at end-2015. This decline reflects negative currency effects, primarily driven by foreign-exchange movements following the Brexit decision and market effects.

Operating costs were SFr298.6 million in the first six months of 2016, compared to SFr296.0 million in the prior-year period, and below the SFr308.3 million in the second half of 2015.

At the end of June this year, the Swiss firm had a total of 424 client relationship officers, a fall from 462 at the end of December last year.

"The first half of 2016 was characterised by accentuated market uncertainty, notably in emerging markets including Asia at the beginning of the year, but also in the context of the June Brexit vote in the UK," EFG International said in a statement.

"The challenging markets created strong headwinds across the financial services industry. As indicated in the update of the business performance for the first quarter on 29 April 2016, EFG International’s business was constrained by the market environment and low levels of client activity. Client activity remained subdued during the first half of 2016, with a slight rise towards the end of the period from the lows in the first quarter," it said.