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Assets under management at record CHF 297 billion – Benefit of cost measures helps to mitigate impact of recent decrease in client activity (1)
Zurich, 10 November 2015 – At the end of October 2015, Julius Baer Group’s assets under management (AuM) amounted to a record CHF 297 billion, an increase since the end of 2014 of CHF 6 billion, or 2%.
In the year-to-date development, Group AuM was supported by positive contributions from continued net new money, market performance, the transfer of AuM from Leumi Private Bank AG in the first half of the year and the transfer of Merrill Lynch’s International Wealth Management business (IWM) in India in September. These positive contributions were partly offset by a negative currency impact of CHF 11 billion following the strengthening of the Swiss franc against almost all currencies so far this year. Whilst the Group did not experience any meaningful client deleveraging over the last four months, net inflows continued to be impacted by the ongoing regularisation of legacy assets in France and Italy as well as a slowdown over the last four months in net new money mainly from Eastern Europe and Latin America. As a consequence, net inflows in the first ten months were, on an annualised basis, just below the low end of the 4-6% medium-term target range.
Benefit of cost measures helps to mitigate impact of recent decrease in client activity
In the first half of 2015, the gross margin had benefitted from robust client transaction and trading activity in the first four months, before reverting to more average levels in May and June. In the four months since the end of June, client activity became more restrained – this was due not only to seasonal influences but, in the last two months of the period, also driven by the increased uncertainty after the volatile stock market movements in August and September as well as reduced foreign exchange trading volumes. As a result, the gross margin for the first ten months was 95 basis points (bps), below the 99 bps recorded in the first half of 2015, but above the 94 bps achieved in the full year 2014.
Since the end of June, the impact of the aforementioned decrease in gross margin was tempered by the further benefits of the cost saving measures implemented in the first half of the year. The cost/income ratio (2) in the first ten months was slightly above the low end of the 65-70% medium-term target range, a clear improvement in cost efficiency from the 69.9% realised in 2014.
Excluding the US provision of June 2015, valuation allowances, provisions and losses were, on an annualised basis, at approximately the same level as for the full year 2014.
As a result, the underlying pre-tax profit (3) margin improved to a level just above the low end of the 30-35 bps medium-term target range, significantly better than the 26 bps realised in 2014.
Solid capital position
Julius Baer remains strongly capitalised. At the end of September 2015, following the final IWM payment to Bank of America, the Group’s BIS total capital ratio stood at 19.7% and the BIS tier 1 ratio at 18.4%, well above the targeted floors of 15% and 12%, respectively.
Julius Baer intends to increase its stake in Kairos to a majority investment
In November 2012 Julius Baer Group Ltd. (Julius Baer) and the leading independent Italian wealth and asset manager Kairos Investment Management SpA (Kairos) announced a strategic partnership. As part of that transaction, Julius Baer’s Italian SIM was integrated into Kairos and Julius Baer acquired 19.9% of Kairos.
Following the strong momentum at Kairos, Julius Baer has initiated negotiations to increase its stake and is considering subsequently listing an adequate minority of Kairos on the Italian Stock Exchange, all subject to negotiations and required approvals. At the end of October 2015, Kairos had AuM of EUR 8 billion.
Julius Baer Fiduciaria S.r.l., Milan, was not part of the original transaction and remains a fully-owned subsidiary of Julius Baer.
Closing of 40% participation in NSC Asesores
The purchase of 40% in NSC Asesores, the largest independent financial advisory firm in Mexico, has been closed on 6 November 2015. The acquisition, which was announced on 20 July 2015, marks Julius Baer’s entry into the second-largest wealth management market in Latin America.
Management transition at GPS
A year and a half after Julius Baer increased its stake in the company to 80%, Jan Gunnar Karsten has been appointed CEO of GPS Investimentos Financeiros e Participações S.A. (GPS), the leading Brazilian independent wealth manager, as of 1 December 2015. He currently heads all client segments and has more than two decades of experience in the Brazilian wealth management market. José Eduardo Martins, founding partner, will assume the role of Vice Chairman of the Board, focusing on new initiatives and strategy. He has been the face of GPS since its inception more than 15 years ago.
2015 full-year results
Julius Baer Group’s detailed financial results for 2015 will be published on 2 February 2016.
(1) Based on unaudited management accounts
(2) Excluding integration and restructuring expenses, the amortisation of intangible assets related to acquisitions or divestments, and valuation allowances, provisions and losses
(3) Excluding integration and restructuring expenses, the amortisation of intangible assets related to acquisitions or divestments, as well as the USD 350 million (CHF 326 million) provision (in June 2015) for the eventual settlement with the US Department of Justice regarding the legacy US cross-border business (the US provision)