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Presentation of the 2010 full-year results for the Julius Baer Group

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  • Julius Baer Group delivered a solid financial performance in 2010, despite the significant strengthening of the Swiss franc against key currencies.

  • Operating income grew by 13% as the result of a 19% increase in average assets under management and a decline in the gross margin from 111 to 105 basis points. Operating expenses increased by 16%, including the first-time consolidation of ING Bank (Switzerland) Ltd (ING Bank) in 2010. Due to the decline in the gross margin and partly as a result of the Swiss franc, the cost/income ratio increased to 65%. Net profit increased by 6% to CHF 504 million.

  • Total client assets increased by 11% to CHF 267 billion. Assets under management (AuM) grew by 10% to CHF 170 billion, on the back of the acquisition of ING Bank, improving net inflows, and a positive market performance, partly offset by a very significant negative currency impact. Assets under custody rose by 12% to CHF 98 billion.

  • Net new money strongly improved to CHF 9 billion or 6% of the start-of-year AuM, mostly as a result of strong inflows in the growth markets and from the Group’s domestic German business.

  • The Julius Baer Group continued to enjoy a position of significant excess capital as expressed by its BIS tier 1 ratio of 23.8% at year-end.

  • Based on this, the Board of Directors will propose to the Ordinary Annual General Meeting (AGM) on 7 April 2011 a dividend of CHF 0.60 per share, up 50% from a year ago. Julius Baer also plans to launch a share buyback programme of up to 5% of the outstanding share capital and with a maximum value of CHF 500 million, to run until the AGM in 2012.


Boris F.J. Collardi, Chief Executive Officer of Julius Baer Group Ltd., said: “The year 2010 turned out to be another eventful year for financial markets and for our industry. I am proud that we made significant strategic progress, for example through the successful integration of ING Bank and the upgrade of our Hong Kong office to a regional booking centre. Whilst our results were impacted by the Swiss franc appreciation, our Group nevertheless showed a pleasing financial performance, allowing an increased proposed dividend and the launch of a buyback programme in due course. Our pure private banking-focused business model and sound financial position will enable us to continue to improve the range and quality of services to our growing international base of discerning clients, to strengthen our position as an employer of choice for highly-qualified and ambitious financial specialists, and to create further value for our shareholders.”

Total client assets amounted to CHF 267 billion at the end of 2010. Assets under management increased by 10% to CHF 170 billion compared with CHF 154 billion at the end of 2009. This rise consisted of CHF 14 billion in AuM from the acquisition of ING Bank, net new money of CHF 9 billion, a positive market performance impact of CHF 8 billion and a very significant negative currency impact of CHF 14 billion that principally resulted from the strong decline in the value of the euro and the US dollar relative to the Swiss franc. Net new money totalled 6% of the start-of-year AuM, compared to 4% in 2009 and was thus at the top end of the targeted range. It especially benefited from strong inflows in the growth markets, particularly in Asia, Russia, Central & Eastern Europe, and Latin America, as well as from the Group’s domestic German business. Assets under custody ended the year at CHF 98 billion after CHF 87 billion at the end of 2009, an increase of 12%, supported by CHF 7 billion in net new custody money.

Operating income grew by 13% to CHF 1,794 million, the result of a 19% increase in average AuM and a decline in the gross margin from 111 to 105 basis points. Net fee and commission income increased by 20% to CHF 980 million, in line with the rise in average AuM. Even though the overall investment and risk appetite improved, the equity transaction volumes did not change much in 2010. Net interest income fell by 2% to CHF 455 million, with the year-on-year decrease in the net interest margin and a more conservative asset allocation in the treasury portfolio offsetting the increase in average deposit levels and average lending to private clients. Net trading income improved by 11% to CHF 332 million, mainly due to the increased volatility in the foreign exchange markets. Other ordinary results rose to CHF 26 million.

Operating expenses increased by 16% to CHF 1,192 million, partly as a consequence of the first-time consolidation of ING Bank in 2010, which contributed to the increase in the total number of employees by 16% to 3,578 – including 752 relationship managers. As a result of the larger staff base, personnel expenses grew by 16% to CHF 791 million. General expenses, including valuation adjustments, provisions and losses, went up by 17% to CHF 345 million.

The large majority of expenses are in Swiss francs, whereas operating income – similar to AuM – has a strong foreign currency exposure, especially to the euro and the US dollar. Partly as a result of the strong Swiss franc and due to the decline in the gross margin, the cost/income ratio increased from 63.1% to 65.4%.

All in all, profit before taxes increased by 8% to CHF 603 million, representing a pre-tax margin of 35 basis points of average AuM. Income taxes went up by 13% to CHF 99 million, representing a tax rate of 16.4%, up from 15.5% in 2009. As a result, the net profit improved by CHF 31 million or 6% to CHF 504 million, and earnings per share came to CHF 2.45 compared to CHF 2.29 in 2009.

As in previous years, in the analysis and discussion of the results in the Media Release, operating expenses exclude integration and restructuring expenses as well as amortisation of intangible assets related to acquisitions. Including these items, as presented in the unadjusted IFRS results in the Annual Report, the net profit was CHF 353 million in 2010, after CHF 389 million in 2009, a decrease of 9%. This decrease is mainly related to integration and restructuring costs in relation to the ING Bank transaction which closed in January 2010.

BIS tier 1 ratio at 23.8% – Significant excess capital position – Balance sheet remains strong

The first-time consolidation of ING Bank in 2010 increased total assets by 8% to CHF 46.3 billion and client deposits by CHF 1.6 billion to CHF 28.8 billion. Due to the ING Bank consolidation as well as the expansion of Julius Baer’s lending activities, the loan book (lombard lending and mortgages) rose by CHF 4.1 billion to CHF 14.6 billion. Total equity was up by 7% to CHF 4.5 billion, and BIS tier 1 capital grew by CHF 0.2 billion to CHF 2.9 billion. Risk-weighted assets increased by 10% to CHF 12.1 billion, resulting in a continued strong BIS tier 1 ratio of 23.8% under Basel II. The enhancement of the Basel II framework, which was implemented as of 1 January 2011, will mainly impact the market risk weightings. Pro forma for this change, the BIS tier 1 ratio was approximately 22.6% at the end of 2010. Under both BIS tier 1 ratio measurements, Julius Baer is in a position of significant excess capital.

Increased dividend proposed, buyback programme planned

Based on the further improvement in net profit and the significant excess capital position, the Board of Directors will propose to the Ordinary Annual General Meeting on 7 April 2011 a dividend of CHF 0.60 per share, an increase of CHF 0.20 or 50% from a year ago. Julius Baer also plans to launch a share buyback programme of up to 5% of the outstanding share capital and with a maximum value of CHF 500 million, to run until the AGM in 2012.

The results conference will be webcast at 9:30 a.m. (CET). All documents (presentation, Business Review 2010, IFRS Annual Report 2010 and press release) are available as of 7:00 a.m. (CET) at www.juliusbaer.com.

Please note the disclaimer regarding forward-looking statements and financial information in the media release PDF attached on the right-hand side.

Important dates

 

7 April 2011:

Ordinary Annual General Meeting, Zurich

11 April 2011:

Ex-dividend date

13 April 2011:

Record date

14 April 2011:

Payment date

12 May 2011:

Release of Interim Management Statement

22 July 2011:

Release of 2011 half-year results, Zurich

   

(1) Excluding integration and restructuring expenses of CHF 65.8 million (CHF 48.7 million net of tax) and the amortisation of intangible assets. Including these items, the net profit was CHF 353 million in 2010, after CHF 389 million in 2009, a decrease of 9%.