At the end of April 2014, Julius Baer Group’s assets under management (AuM) amounted to CHF 264 billion, an increase of 4% from the end of 2013. This included approximately CHF 53 billion from Merrill Lynch’s International Wealth Management (IWM) business outside the US, which Julius Baer is in the final phase of transferring, of which CHF 42 billion was booked on the Julius Baer platforms and paid for. Total client assets grew by 3% to CHF 359 billion.
Improved gross margin, net new money well within target range
The increase in Group AuM was supported by the inclusion of CHF 6 billion from Brazilian subsidiary GPS, which was consolidated for the first time following the increase in ownership from 30% to 80% in March 2014. Other drivers were continued net inflows and a positive market performance, partly offset by a negative currency impact due to the appreciation of the Swiss franc against a number of leading currencies, especially the US dollar. Net inflows were, on an annualised basis, well within the 4-6% medium-term range, with continued strong contributions from the growth markets and the local business in Germany.
The gross margin improved to 95 bps, up 4 bps from the second half of 2013. Excluding IWM, the extrapolated Julius Baer ‘stand-alone’ gross margin was approximately 98 bps, up from approximately 96 bps in the second half of 2013, supported by an improvement in client transaction activity in all regions.
The Group’s cost/income ratio was slightly above the 73.3% realised in the second half of 2013. Due to the timing of the key IWM restructuring steps throughout the year, the cost/income ratio is expected to improve closer to the 65-70% medium-term target range in the second half of 2014, subject to the development of the gross margin.
Julius Baer remains strongly capitalised. At the end of March 2014, the Group’s BIS total capital ratio stood at 22.0% and the BIS tier 1 ratio at 20.6%, well above the targeted floors of 15% and 12%, respectively.
IWM productivity advancing towards 2015 target
After the end of April 2014, following the additional transfer of assets and the closing of the IWM transaction in the Netherlands in the weekend of 10-11 May, IWM AuM reported increased further to approximately CHF 54 billion, of which CHF 43 billion are booked on the Julius Baer platforms and paid for.
The first four months of 2014 brought significant progress on the productivity of the IWM business. The former IWM relationship managers already started to contribute to net new money, and, at 83 basis points (bps), the extrapolated gross margin on the IWM AuM advanced close to the 2015 target of 85bps.
In Hong Kong and Singapore, the IWM integration process was completed successfully at the beginning of the year, with a very high asset transfer rate of over 80% and with the gross margin on the IWM AuM in Asia advancing very close to the Julius Baer ‘stand-alone’ gross margin in Asia.
Integration-related restructuring on track
The previously communicated restructuring following the completion of the majority of the IWM asset transfers is on track. During the first four months of 2014, on a net basis, the integration-related rightsizing resulted in more than 100 employees leaving the Group, thereby enabling the Group to make good progress according to plan towards the realisation of the transaction-related synergy targets.
Julius Baer Group’s detailed financial results for the first half of 2014 will be published on 22 July 2014.
(1) Based on unaudited management accounts