Julius Baer still cautious after Signa bankruptcy
Published: Thursday, Jul 25th 2024, 15:10
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Julius Baer still has to work on overcoming the Signa debacle. The Zurich-based private bank reported a clear decline in profit for the first half of 2024 and the inflow of new client assets also remained subdued. The bank has now accelerated its ongoing cost-cutting measures.
Half-year profit fell by 15 percent year-on-year to CHF 452 million, as Julius Baer announced on Thursday. The result was depressed above all by a weak interest business as a result of the changed interest rate environment. The bank had to pay significantly higher interest on its clients' credit balances.
New money restrained
Julius Baer received new money totaling CHF 3.7 billion in the first half of the year, compared with CHF 7.1 billion in the prior-year period. Nevertheless, the inflow of new money recovered after a negative start in January and grew at an annualized rate of a good 3 percent in the following months, Interim CEO Nic Dreckmann emphasized to the media.
Assets under management (AuM) amounted to CHF 474 billion at the end of June, an increase of 11% compared to the end of 2023. In addition to new money inflows, the significant increase was primarily due to positive developments on the financial markets and more favorable exchange rate conditions.
Settlement of private debt
Julius Baer was in the headlines for months from November 2023 due to a large loan granted to the now insolvent Signa Group owned by Austrian investor René Benko. At the beginning of February, the bank wrote off the entire loan amount of over CHF 600 million, while at the same time the then CEO Philipp Rickenbacher resigned. On Tuesday, the bank presented a new Group CEO, Stefan Bollinger, currently a Goldman Sachs banker, who will take office at the beginning of 2025.
Meanwhile, the winding down of the private debt loan book is progressing as planned, said CFO Evie Kostakis. The bank had decided to exit this business by writing off the Signa exposure.
The nominal value of the loan book still amounted to around CHF 600 million at the end of June, compared with CHF 800 million at the end of 2023. The wind-up should be largely completed by the end of 2026.
Higher savings
Further growth is now to be ensured not least by the recruitment of new client advisors. Julius Baer ramped up its recruitment last year in the wake of the CS takeover by UBS and hired 95 new client advisors. In the first half of 2024, it hired a net total of 21 advisors. The aim is to recruit 50 to 60 client advisors in the current year, Dreckmann said.
At the same time, the bank is making faster progress with its ongoing cost program than initially planned. The savings of CHF 130 million per year targeted for 2025 will probably already be exceeded in the current year, said the CFO. Annual savings of 145 million would even be achieved by the end of next year.
However, this does not mean that the already planned job cuts will be higher, the bank said when asked. In February, the bank announced that the ongoing cost-cutting program would involve a reduction of around 250 jobs at Julius Baer.
Share clearly in the red
The half-year figures were received negatively on the stock market, with the profit figures in particular falling well short of market expectations. Analysts were also disappointed that the private bank did not announce a new share buyback programme despite its good capitalization. The share price was down around 9.5 percent in the afternoon at CHF 47.04.
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