The Zurich-headquartered firm flagged a number of key points in its latest full-year statement, including the progress of the BSI integration, cost reduction achievements, challenges in Asia and the Americas, and underlying profitability in what was a challenging year overall for financial markets.

Excluding the impact of BSI, as well as non-recurring items and life insurance contributions, underlying operating income on a standalone basis dropped from SFr696.6 million to SFr677.8 million. “This decline primarily reflects a decrease in underlying net commission due to lower levels of client activity than in previous years, as well as the GBP depreciation (affecting 15 per cent of total commissions) following the Brexit vote,” the firm said. EFG's standalone underlying net profit was SFr91.1 million (excluding certain non-recurring items), in line with the previous year.

Meanwhile, standalone underlying operating expenses fell year-on-year to SFr556.8 million from SFr588.0 million, as “EFG exceeded the targets of its cost reduction programme initiated in 2015”, the firm added. Its standalone underlying cost/income ratio improved to 82.7 per cent in 2016 from 83.8 per cent in 2015.

In other highlights, standalone net new assets totalled -SFr0.5 billion in 2016, down from SFr2.4 billion in the previous year. This was impacted - among other factors - by challenging conditions in Asia, the firm said, where net asset outflows stood at SFr1.8 billion. Nevertheless, Asia achieved "record pre-provision profit", up 55 per cent year-on-year, it added.

Meanwhile, the UK continued to deliver strong net new asset growth of 8 per cent, with net asset inflows of SFr1.6 billion. Asset generation also remained robust in continental Europe at SFr0.6 billion, but was flat in Switzerland, EFG added. There were -SFr0.7 billion of net asset outflows in the Americas region, which it attributed primarily to difficult market conditions and tax amnesty programmes.

Overall, revenue-generating assets under management stood at SFr144.5 billion at end-2016, compared to SFr83.3 billion in 2015.

BSI acquisition “well on track”

A number of important BSI integration milestones have been reached, EFG said. It is also looking to cut the purchase price by SFr277.5 million against the estimated SFr1.06 billion announced on 1 November.

"EFG’s valuation is subject to BTG’s expected objection and, if necessary, verification by an independent expert as required under the SPA, which could lead to a change of the purchase price adjustment," the firm said.

This aside, the integration in Asia - one of the combined bank’s key regions - is complete, with Hong Kong and Singapore having been ticked off the list in March 2017 and November 2016, respectively.

“It is planned that the integration of BSI’s Swiss business will take place in the course of April, and the remaining BSI entities are also expected to be integrated in the second quarter of 2017, earlier than anticipated,” EFG said. “As a final step, the migration of BSI to EFG’s IT platform is due to be completed by end-2017.”

The combined group is targeting annual pre-tax cost synergies of around SFr240 million, which it expects will be fully realised in 2019.  

“With the acquisition of BSI, EFG reached an important milestone in its history in 2016,” said Joachim Straehle, chief executive at EFG International. “While focusing on the completion of the transaction and on driving forward the integration process, we maintained our underlying profitability in a challenging market environment due, in particular, to the disciplined execution of our cost reduction programme.”

He added: “Our priority for the coming years is to fully realise the potential of this transformational business combination for the benefit of our clients, shareholders and employees.”