Julius Baer 1H Net Profit Slides; Split On Track
Julius Baer Holding Monday said that first-half net profit nearly halved because the bank couldn't cut costs as sharply as revenue fell, and it said it was on track to separate its private bank from asset-management activities later this quarter.
The Zurich-based private bank for the wealthy said net profit for the six months ended June 30 was 218.6 million Swiss francs ($204.3 million), from CHF412 million a year earlier. The result topped analyst estimates, which averaged CHF211 million.
In its outlook, Julius Baer said only that a planned split of its two main arms is set to be completed by the end of the third quarter. The move is subject to regulatory approval. Julius Baer also plans to list U.S.-based mutual funds arm Artio Global as soon as this quarter, market conditions and U.S. regulators permitting.
The bank promised to disclose additional information on strategy, management and financial targets Sept. 24.
Initially, shares in the bank surged on the better-than-expected earnings, but quickly let gains slip. Kepler Capital Markets analyst Mathias Bueeler said most of the profit beat was due to an unusually lower tax rate, while Keefe, Bruyette & Woods said Julius Baer management would need to issue upbeat commentary at a news conference at 0730 GMT to send the shares higher.
At 0718 GMT, Julius Baer shares were down CHF0.04, or 0.1%, at CHF48.18, bucking an 0.7% rise in the Stoxx Europe 600 bank index.
The bank's revenue fell 24% to CHF1.22 billion from CHF1.6 billion, as fewer client assets generated less in fees and as clients increasingly kept assets liquid instead of trading.
Julius Baer's financial chief struck a cautionary tone for the private bank, which missed expectations for fresh funds with CHF4 billion in net new money, because wealthy clients are still shying away from risk and holding large piles of cash.
"They are still fairly risk-adverse, which will obviously impact our results if this continues in the second half of the year," CFO Dieter Enkelmann told a conference call.
Cash and liquid holdings don't generate as much income for banks as when clients trade more frequently or invest in high-margin products.
As at other Swiss banks, turmoil in securities markets has hit Julius Baer, which has responded with cost cuts and layoffs. Assets have dropped because of sharply lower market values, and Switzerland's recent concessions on banking secrecy are also expected to mean fewer clients.
However, Enkelmann said the private bank hadn't had any outflows as a result of the debate surrounding banking secrecy.
Julius Baer managed to cut costs by 12% to CHF832 million in the first half, mainly by paying lower bonuses, axing jobs and cutting spending on areas such as marketing.
At Julius Baer's asset management arm - which includes hedge fund boutique GAM - outflows slowed to CHF500 million. CFO Enkelmann said institutional clients are proving "stickier" than private clients, who are still taking flight from investments such as hedge funds.
The bank, which has gained 21% this year amid a 33% rise in the Stoxx Europe 600 bank index, has drawn mixed reactions to its planned split, with some saying two units alone could demand richer valuation, and others arguing it won't necessarily correct a sizable conglomerate discount.
-By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@dowjones.com
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