Julius Baer eyes job cuts in bid to slash costs
Julius Baer Holding said Wednesday it plans to lower overall operating expenses by up to 15% with measures that include job cuts at its flagship private bank.
"Assuming continued business development like in the first two months of 2009, group operating expenses should be decreased by 10% to 15%," chief financial officer Dieter Enkelmann told investors at a financial conference sponsored by investment bank Morgan Stanley, according to the presentation material.
That translates to cuts of Sfr279m ($244.7m), based on 2008 earnings from the bank, which employed 4,335 people at year-end, 69% of them in private banking.
The comments from Enkelmann, confirmed by a spokesman, would represent a redoubling of current cost-cutting efforts. They also mark a subtle shift since February for the private bank, which has seen a costly and initially successful expansion since 2006. However, costs at the unit, which caters to the financial needs of the wealthy, have come to haunt Julius Baer as it girds for lower revenue due to a shrinking asset base amid falling securities markets.
Julius Baer said cuts at the private bank will be made according to strategic importance and profitability of existing locations, which include Hong Kong, Abu Dhabi and St Moritz. Bank spokesman Jan Bielinski said Julius Baer isn't ruling out closing offices, but didn't elaborate on specifics or on how high job cuts might tally.
"The numbers presented by Julius Baer should be a wake-up call for many other competitors. This is a frank disclosure of the storm damage caused by the last 12 months," Seb Dovey, managing director of wealth management consultant Scorpio Partnership, said in response to emailed questions.
Meanwhile, Julius Baer will continue to hire advisors for the wealthy selectively and mainly in existing locations. Hires from 2007 and 2008 are fuelling net inflows of fresh money to the unit so far this year, Enkelmann said.
All told at the private bank, gross margins can be expected to decline due to reduced client activity and to an unfavourable asset mix, Enkelmann said.
The cost cuts come as Julius Baer told investors that outflows at GAM, which sells fund-of-hedge-funds, have continued in 2009, albeit at a slower pace than in the fourth quarter.
GAM expects managed assets to stabilise, then recover in the second half, Enkelmann said.
Julius Baer said it still plans to spin off Artio Global, a mutual funds arm managed by Richard Pell and Rudolph-Riad Younes, "as market conditions allow." That unit has shown slightly positive net new money so far this year, Julius Baer said.
At 10.06 GMT, Julius Baer stock was Sft0.64 lower, or down 2.3%, at Sfr27.36, compared with a 0.2% rise in the Stoxx Europe 600 bank index. An analyst said this was because investors may have been banking on even more aggressive spending cutbacks.
Earlier Wednesday, Julius Baer said it is buying back Augustus Asset Management, specialised in fixed income and foreign exchange with $7.6bn (€5.7bn) in assets, for an undisclosed price.
-- By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@dowjones.com
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