Julius Baer says net new money from clients misses target

Julius Baer has admitted that net new money from clients has amounted to less than 3% of managed assets in the first four months, thereby missing targets; this was due to clients in Latin America and eastern Europe showing "slow momentum", Asian customers reducing borrowings and French and Italians repatriating money for tax purposes. This now puts Julius Baer's full year target in jeopardy. The private bank added it is planning to reduce its costs by CHF 50m ($51m) by the end of the year in hopes of bringing the cost-income ratio back to the medium-term target.
Julius Baer, the Zurich-based private bank, hasn't reached the target for net new money in the first four months of the year because of negative currency effects and a loss of momentum in key markets. The bank's cost-income ratio worsened as a consequence of hiring more client advisers.

Julius Baer is planning to reduce its costs by 50 million Swiss francs by the end of the year to bring the cost-income ratio back to the medium-term target, the bank said in a statement today. This is after the institute accelerated its hiring pace and increased the number of what it calls relationship managers (RM) by more than 30.

The hirings will continue «well into the remainder of the year,» the bank said. The cost-income ratio for the first four months of 2016 ended up above the 64-68 percent range set as a medium-term target because of the investments in the number of RM's. The bank didn't specify how it will reduce the costs.

Assets Increase on Acquisitions

Assets under management (AuM) at Julius Baer increased 2 percent to 305 billion francs, a record. The increase included the assets it inherited by integrating Kairos Investment Management of Italy, which amounted to 9 billion francs.

Discounting the new money from Kairos, Julius Baer suffered an decline of AuM, partly because of a negative currency effect as the U.S. dollar and the pound dropped against the franc. AuM also dropped because of «continued slow momentum» in Eastern Europe and Latin America, client deleveraging in Asia and because customers in France and Italy continued to clean up their portfolios in view of the white-money strategy coming into force.

Hiring Spree Far From Over

Julius Baer still expects to be able to reach its target range of 4 to 6 percent net new money for the full year because of the RM's it has attracted so far and given the expected new hirings. The bank added new client advisers across a number of regions, including Asia, where the new management is reorganizing the business.

In the first four months of 2016, Baer increased the stakes in Kairos to 80 percent and GPS Investimentos Financeiros of Brazil to 100 percent. Additionally, the company now also fully owns its subsidiary in Japan, having previously held a stake of 60 percent.

The closing of the acquisition of Commerzbank International Luxembourg is still expected to take place in the third quarter of 2016.