Bloomberg News

Julius Baer Says Profitability Drops as Clients Shun Risk

May 15, 2012

The headquarters of Julius Baer Group Ltd. stands in Zurich. Photographer: Peter Frommenwiler/Bloomberg

The headquarters of Julius Baer Group Ltd. stands in Zurich. Photographer: Peter Frommenwiler/Bloomberg

Julius Baer Group Ltd. (BAER), the Swiss wealth manager established in 1890, said revenue earned on assets under management dropped in the first four months of this year as client appetite for risk remained “subdued.”

Baer fell the most in more than three months in Zurich trading after reporting the gross margin, a measure of profitability, was “slightly below” 100 basis points over the period compared with 105 basis points in 2011. A basis point is one-hundredth of a percentage point.

Switzerland’s fourth-biggest money manager is seeking acquisitions and building branch networks in emerging markets and Europe as a crackdown on tax evasion pushes customers to repatriate funds from cross-border accounts. While net inflows beat the bank’s target of 4 percent to 6 percent annualized growth, clients traded less, according to Julius Baer.

“The message in this update is not overly positive,” said Dirk Becker, a Frankfurt-based analyst with Kepler Capital Markets. “They’re reeling in new client money at the expense of their margins. Julius Baer is one of the most expensive financial stocks.”

Julius Baer fell as much as 4.9 percent and was down 4.8 percent at 32.56 Swiss francs at 10:36 a.m., making it the worst performer on the 43-company Bloomberg Europe Banks and Financial Services Index, which gained less than 0.1 percent.

Julius Baer said it’s trying to bring down its cost-to- income ratio after the measure worsened to more than 70 percent during the first fourth months of this year from 68 percent in 2011.

Net Inflows

Assets under management rose 4 percent to 178 billion francs ($190 billion) at the end of April, from 170.3 billion francs four months earlier, the bank said today in a statement.

Net inflows included strong contributions from “growth markets and from the local private banking business in Germany,” the bank said. The bank hired relationship managers and opened a new representative office in Tel Aviv in March.

Julius Baer said Feb. 6 it expects to pay a fine and hand over client data to U.S. authorities as part of an investigation into Americans using Swiss banks to hide money from the Internal Revenue Service. The bank, which exited its U.S. private-client business between 2009 and 2011, said at the time that the amount of the fine is not “reliably assessable.”

To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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