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Assets under management (AuM) grew to CHF 179 billion, an increase of 5% since the end of 2011 and a record high for Julius Baer. This increase was driven by strong net inflows of CHF 5.5 billion (over 6% annualised), as well as positive market performance and currency impacts. Total client assets (including assets under custody) went up by 4% to CHF 269 billion.
Operating income declined by 4%, while average AuM increased by 3%, translating into a gross margin of 98 basis points (bps), 7 bps lower than in the first half of 2011. This decline is a direct reflection of reduced levels of client activity in foreign exchange trading and securities transactions.
Adjusted operating expenses decreased by 11%, mainly because the first half of 2011 included the one-off tax-related Germany payment (2011 Germany payment) of EUR 50 million (CHF 65 million). Excluding the 2011 Germany payment, the decrease in adjusted operating expenses was 1%.
As a result, the adjusted cost/income ratio (2) went up to 70%.
Adjusted net profit including the 2011 Germany payment increased by 13% to CHF 221 million and adjusted earnings per share by 19% to CHF 1.14. Excluding the 2011 Germany payment, adjusted net profit decreased by 11%.
IFRS net profit improved by 19% to CHF 176 million and IFRS earnings per share by 26% to CHF 0.90.
As at the end of June, the Group’s BIS total capital ratio stood at 23.6% and the BIS tier 1 ratio at 21.4%, essentially unchanged from the end of 2011.
Boris F.J. Collardi, Chief Executive Officer of Julius Baer Group Ltd., said: “Julius Baer’s growth strategy remained well on track in the first half of 2012 as evidenced by the strong net new money inflows. At the same time, the ongoing economic and political uncertainty, dominated by the eurozone crisis, continued to frame the market environment. Against this background, our clients maintained their overall cautious investment stance leading to relatively restrained transaction and trading activity. Despite the impact of these developments on revenues, we largely defended our profitability on account of continued cost containment and careful allocation of resources.”
Total client assets amounted to CHF 269 billion at the end of June 2012, an increase of 4% since the end of 2011. Assets under management went up by 5%, or CHF 8.5 billion, to CHF 179 billion compared with CHF 170 billion at the end of 2011. The increase in AuM to a new record high level was the result of net new money of CHF 5.5 billion, a positive market performance impact of CHF 2.5 billion and a positive currency impact of CHF 0.5 billion. The net new money inflows, at an annualised rate of 6.4%, were helped by strong contributions again from the growth markets and from the local private banking business in Germany as well as by modestly positive contributions from the cross-border European and local Swiss businesses. Average AuM (calculated on the basis of monthly AuM levels) amounted to CHF 177 billion, an increase of 3% compared to the first half of 2011. Assets under custody grew to CHF 90 billion, after CHF 88 billion at the end of 2011, an increase of 3%.
Operating income decreased by 4% year on year to CHF 863 million and the gross margin declined by 7 bps to 98 bps. Net fee and commission income declined by 5% to CHF 471 million, reflecting the reduced level of client activity in transacting securities. Net interest income increased by 2% to CHF 323 million despite lower dividend income on trading portfolios which is booked under interest income. Excluding the trading portfolios-related dividend income, which decreased from CHF 97 million in the first half of 2011 to CHF 90 million in the first half of 2012, underlying net interest income grew by 6% to CHF 232 million, driven by an increase in loan volumes and higher treasury income. Net trading income decreased by 39% to CHF 52 million, partly due to the aforementioned dividend reporting impact. When readjusted on the same basis as for net interest income above, the underlying net trading income fell by 22% to CHF 143 million, mainly as a result of lower client-related foreign exchange trading income following reduced volatility in the FX markets. Other ordinary results totalled CHF 18 million, compared to a negative CHF 1 million in the first half of 2011, with no material non-recurring items in either period.
Adjusted operating expenses decreased by 11% year on year to CHF 597 million. Excluding the 2011 Germany payment, the decrease in adjusted operating expenses was 1%. The total number of employees decreased by 1% year on year to 3,649, which includes 801 relationship managers. Helped by the reduction of the staff base, adjusted personnel expenses declined by 2% to CHF 404 million. Adjusted general expenses, including valuation allowances, provisions and losses, decreased by 29% to CHF 161 million. Excluding the 2011 Germany payment, the adjusted general expenses were unchanged, despite the inclusion of CHF 14 million of expenses related to the US tax situation; without these, the adjusted general expenses decreased by 9%.
As a result of the operating income developments, and despite the improvement in the cost base, the adjusted cost/income ratio increased to 70%, compared to 68% in the first half of 2011.
Accordingly, adjusted profit before taxes increased by 15% year on year to CHF 266 million. The related income taxes increased to CHF 45 million, representing a tax rate of 17%. As a result, adjusted net profit improved by 13% to CHF 221 million. Helped by the reduction in the number of shares resulting from the share buyback programme that was completed in February, the adjusted earnings per share (EPS) improved by 19% to CHF 1.14.
Excluding the 2011 Germany payment, adjusted profit before taxes declined by 10%, adjusted net profit by 11%, and adjusted EPS by 6%.
As in previous years, in the analysis and discussion of the results in the Media Release and the Business Review, operating expenses exclude integration and restructuring expenses as well as the amortisation of intangible assets related to previous acquisitions or divestitures. Including these items, as presented in the unadjusted IFRS results in the Half-year Report, net profit was CHF 176 million in the first half of 2012, an increase of 19% compared to the CHF 147 million earned in the first half of 2011, and EPS increased 26% to CHF 0.90, from CHF 0.72 a year ago.
Solid capital base – Capital reduction executed
From the end of 2011, total assets increased by 2% to CHF 54.2 billion. Over the same period, client deposits rose by CHF 2.9 billion to CHF 37.7 billion, and the total loan book by CHF 1.6 billion to CHF 18.0 billion (of which CHF 13 billion were Lombard loans and CHF 5 billion mortgages), resulting in a loan-to-deposit ratio of 0.48. As the benefit of the net profit in the first six months was balanced by the combined capital outlay for completing the share buyback programme in January and February and for the special dividend in April, total equity decreased by CHF 0.1 billion to CHF 4.2 billion, BIS total capital was unchanged at CHF 3.1 billion and BIS tier 1 capital was again at CHF 2.8 billion. Risk-weighted assets increased by CHF 0.1 billion to CHF 12.9 billion. As a result, the BIS total capital ratio stood at 23.6% and the BIS tier 1 ratio at 21.4%, continued confirmation of Julius Baer Group’s very solid capital base.
Julius Baer has no treasury exposure to Greek, Portuguese, Spanish or Irish issuers and only marginal exposure to Italian sovereign credit.
As already announced last month, the capital reduction as resolved by the Ordinary Annual General Meeting on 11 April 2012 was executed by cancellation of all the 10,240,000 Julius Baer registered shares repurchased under the share buyback programme that was completed last February. The registered share capital of Julius Baer Group Ltd. now amounts to CHF 3,927,815.12, divided into 196,390,756 registered shares with a par value of CHF 0.02 each.
The results conference will be webcast at 9:30 a.m. (CEST). All documents (Presentation, Business Review First Half 2012, Half-year Report 2012 and Media Release) will be available as of 7:00 a.m. (CEST) at www.juliusbaer.com.
Please note the disclaimer regarding forward-looking statements in the media release PDF attached on the right-hand side.
14 November 2012:
Interim Management Statement
4 February 2013:
Release of 2012 annual results
10 April 2013:
Ordinary Annual General Meeting 2013
(1) The adjusted results presentation as presented and commented in this Media Release and in the Business Review are derived by excluding from the reviewed IFRS financial statements the integration and restructuring expenses as well as the amortisation of intangible assets related to previous acquisitions or divestitures.
(2) Calculated using adjusted operating expenses, excluding valuation allowances, provisions and losses.