Interim Management Statement for the first ten months of 2010
Julius Baer Group’s assets under management (AuM) rose to CHF 175 billion at the end of October 2010. Including the acquisition of ING Bank (Switzerland) Ltd, this represents an increase of 14% vs. year-end 2009. Total client assets increased by 12% to CHF 271 billion.
The year-to-date AuM increase was supported by a positive market performance, whilst the Swiss franc currency translation impact was negative as a result of the decline of the euro and the US dollar. Net new money inflows accelerated the momentum that started to build up during the first half of this year and have grown at an annualised pace well into the Group’s 4-6% medium-term target range in the first ten months. All regions contributed positively, with the strongest increase coming from the growth markets Asia, Latin America, Middle East and Russia & Eastern Europe, as well as from the onshore German business.
Whilst the gross margin was year-to-date slightly below the level of the first half of 2010 (107bps), it was ahead of the level achieved in the second half of 2009 (103 bps). Whereas client transaction and trading volumes continued to be subdued and volatile, the Group continues to develop and implement initiatives that are expected to support and strengthen the gross margin over the medium term.
Relative to the 63.4% reported in the first half of 2010, and calculated on the same basis, the cost/income ratio for the first ten months of 2010 was slightly more elevated. This increase was attributable to the gross margin development and due to selective further investments related to ongoing business initiatives.
The Julius Baer Group continued to manage its balance sheet conservatively and maintains a solid capital base. The BIS tier 1 ratio stood at 23.6% at the end of September 2010. The enhancement of the Basel II framework, which will be implemented by 1 January 2011, will mainly impact the market risk weightings. Pro forma for this change, the BIS tier 1 ratio was approximately 22%.
The Swiss Federal Department of Finance recently announced it will open official negotiations with Germany and the UK on tax matters. A successful conclusion of these negotiations would provide German- and UK-resident clients of Swiss banks the opportunity to regularise any undeclared assets whilst maintaining their financial privacy. Julius Baer has accomplished a very strong international diversification of its client base since 2005, particularly into emerging markets. As a consequence, based on the assumptions that can realistically be made today, Julius Baer strongly believes that any potential future negative impact on AuM will be more than offset by continued strong inflows, even if other EU countries were to enter into similar negotiations with Switzerland. Julius Baer therefore sees no reason to adjust its medium-term net new money target range.
Julius Baer Group’s detailed financial results for the full year 2010 are scheduled for release on 7 February 2011.
Please also note the disclaimer regarding forward-looking statements and financial information in the PDF attached on the right-hand side.