- Strategy for the next period of growth, following successful transformation started in 2020
- In the strategic cycle 2023-2025 Julius Baer will
- FOCUS on value creation for clients and sustainable profitability through high-quality revenues and improved efficiency
- SCALE its business in key markets through organic and inorganic growth
- INNOVATE wealth management through digital advancements
- New medium-term targets (2023-2025)
- Adjusted* cost/income ratio of below 64% by 2025
- Adjusted* pre-tax margin of 28 to 31 basis points by 2025
- Over 10% annual growth in adjusted* pre-tax profit over the 2023-2025 cycle
- Adjusted* return on BIS CET1 capital of at least 30% over the 2023-2025 cycle
- Update of capital distribution policy with a clear commitment to return capital exceeding a 14% BIS CET1 capital ratio via annual share buy-backs (in addition to 50% dividend pay-out ratio)
- Strategy underpinned by engagement-led sustainability strategy and strong risk management
Zurich, 19 May 2022 – Firmly on track to deliver on its current strategy and financial targets by year-end, Julius Baer Group today provides an update of its strategy, including a new set of financial targets for the three-year cycle starting in 2023.
Philipp Rickenbacher, CEO of Julius Baer, said: “We are initiating a new phase of profitable growth, building on the transformation we pursued successfully since 2020. Our unique client-centric business model and our dedicated focus on high and ultra-high net worth clients put us in a strong competitive position to shape our future. Capitalising on this strength, by the end of the decade, we will solidify our standing as the leading international wealth manager by growing the size of our business, its profitability, increasing its earnings quality and evolving the way we operate.”
“In our next strategic cycle, we will focus on value creation for our clients, increasing recurring revenue generation and efficiency. We will also scale our business in selected key markets and innovate wealth management for the benefit of our clients. Underpinned by an engagement-led sustainability strategy and strong risk management, this will create value for all our stakeholders.”
FOCUS on sustainable profit growth, evolution of pure wealth management business model
Julius Baer will focus on enhancing the quality of its revenues by stepping up its ability to increase recurring income. This will entail an increase of its discretionary mandate penetration, positioning delegated solutions as a strong value proposition to complement its market-leading advisory offering. Further, it will include an evolution of its product mix, and continued value-based pricing.
Through strategic and dynamic cost management Julius Baer anticipates gross expense savings of CHF 120 million by 2025, materialising linearly over the 2023-2025 cycle. These savings will be achieved by further streamlining the geographic footprint and market coverage, greater efficiency through the use of technology and agile working methods, as well as by optimising its organisational structure and legal entity portfolio.
Growth to SCALE in selected key markets
In an acceleration of its core market strategy, Julius Baer will place particular emphasis on scaling its business where the opportunities to drive critical mass and exponential profit growth are highest. In Europe, Julius Baer will leverage its outstanding onshore footprint in Germany, the UK and Iberia, as well as the leading position it enjoys in its home market of Switzerland. Asia Pacific, where it has an excellent standing with very wealthy clients, will continue to be served out of the Singapore and Hong Kong hubs. In the growth markets of Brazil, the Middle East and India, the Group will build on its well-established presence to seize further attractive business opportunities.
Growth in these markets will be pursued through three routes. Firstly, by recruiting the best talent, returning to a net positive hiring number for client-facing staff (relationship managers and their assistants, investment advisors and wealth planners). Secondly, Julius Baer will push the development of its in-house talent front to back. And thirdly, it will additionally seek to grow through a disciplined approach to M&A, building on its proven track record of forging value-creating transactions and their successful integration.
INNOVATE through digital advancements of wealth management
Over the next strategic cycle 2023-2025, Julius Baer foresees an additional investment into technology of about CHF 400 million in total, on top of today’s investment budget, to be achieved incrementally and largely capitalised. The impact of this on expenses will be mitigated by the targeted cost savings of CHF 120 million mentioned above.
Technology investments will be dedicated to operational efficiency, the support of relationship managers, a new proprietary digital wealth management solution catering explicitly to high net-worth individuals, and the continuous expansion of external technology partnerships.
Further to current investments in its alternative assets offering, such as private markets and real estate, the Group will explore the emerging, albeit volatile, class of digital assets, keeping a close eye on how it evolves and the opportunities it presents. Integrating digital assets into its holistic wealth management proposition will position Julius Baer firmly at the interface of digital assets and the fiat world. The Group is well-prepared to successfully navigate both its clients and its business through the disruptions decentralised finance will inevitably pose.
Financial targets 2023-2025 and updated capital distribution policy
Starting 2023, Julius Baer Group will introduce ambitious new three-year targets, assuming no meaningful deterioration in markets or foreign exchange rates:
- A highly competitive adjusted* cost/income ratio of below 64% by 2025 (current target 67% or lower)
- An adjusted* pre-tax margin of 28 to 31 basis points by 2025 (current target 25-28 basis points)
- Over 10% annual growth in adjusted* pre-tax profit over the 2023-2025 cycle, (unchanged)
- An industry-leading adjusted* return on BIS CET1 capital of at least 30% over the 2023-2025 cycle (unchanged)
Julius Baer Group today is also updating its capital distribution policy with an explicit commitment to returning excess capital to shareholders. Fifty per cent of the Group’s adjusted net profit will be distributed via ordinary dividend, as stated at the presentation of the full-year results in February 2022. The dividend policy remains progressive: As before, the per-share ordinary distribution (in the absence of significant events) is intended to be at least equal to the previous year’s dividend per share. In addition, while the Group’s BIS CET1 capital ratio floor remains at 11%, all capital meaningfully exceeding a BIS CET1 capital ratio of 14% at the end of the financial year will be distributed via share buy-backs in the subsequent year, unless there are opportunities for M&A transactions which fit the Group’s strategic and financial criteria.
The pursuit of the new strategic programme and its targets will be underpinned by an engagement-led sustainability strategy, whereby Julius Baer acts as responsible wealth manager for its clients and operates as a responsible corporate citizen. It will encompass a prudent and conservative management of its balance sheet and risk profile, with continuous investment in risk management across the Group.
*) For definition of adjusted result, please refer to www.juliusbaer.com/APM.
Cautionary statement regarding forward-looking statements
This media release by Julius Baer Group Ltd. (‘the Company’) includes forward-looking statements that reflect the Company’s intentions, beliefs or current expectations and projections about the Company’s future results of operations, financial condition, liquidity, performance, prospects, strategies, opportunities and the industries in which it operates. Forward-looking statements involve all matters that are not historical facts. The Company has tried to identify those forward-looking statements by using the words ‘may’, ‘will’, ‘would’, ‘should’, ‘expect’, ‘intend’, ‘estimate’, ‘anticipate’, ‘project’, ‘believe’, ‘seek’, ‘plan’, ‘predict’, ‘continue’ and similar expressions. Such statements are made on the basis of assumptions and expectations which, although the Company believes them to be reasonable at this time, may prove to be erroneous.
These forward-looking statements are subject to risks, uncertainties and assumptions and other factors that could cause the Company’s actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Important factors that could cause those differences include, but are not limited to: changing business or other market conditions, legislative, fiscal and regulatory developments, general economic conditions in Switzerland, the European Union and elsewhere, and the Company’s ability to respond to trends in the financial services industry. Additional factors could cause actual results, performance or achievements to differ materially. In view of these uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements. The Company and its subsidiaries, and their directors, officers, employees and advisors expressly disclaim any obligation or undertaking to release any update of or revisions to any forward-looking statements in this media release and any change in the Company’s expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation.