Zurich, 22 November 2021 –Julius Baer’s profitability rose significantly in the first ten months of 2021 on the back of strong growth in client assets and substantial improvements in cost efficiency, complemented by a near absence of credit losses. While the execution of the share buy-back programme continued without interruption, Julius Baer’s capital position remained robust. At the same time, the return on CET1 capital is well ahead of target and continues to be among the highest in the sector. Based on these results, Julius Baer is in an excellent position to deliver on the medium-term financial targets set at the beginning of 2020.
Strong growth in assets under management
Assets under management (AuM) rose to CHF 484 billion at the end of October 2021, a year-to-date increase of 12%. The increase was driven by continued net new money inflows (4.4% annualised) as well as positive stock market performance and currency movements. The year-to-date strengthening of a number of key currencies, particularly the US dollar, against the Swiss franc was only partly offset by a weaker euro.
Solid gross margin development
The gross margin for the first ten months of 2021 was slightly above 82 basis points (bp). The decline from the 88 bp reported for the full year 2020 reflects a softening in client activity from the exceptionally high levels witnessed last year. While the gross margin contribution from net interest income was slightly lower compared to full year 2020, the contribution from recurring fee income improved.
The slowdown in client activity relative to the strong first quarter of 2021 continued from the second to the third quarter and well into October. Initial results for November, however, indicate a potential recovery for the final two months of the year. As a result, in the July to October period, the gross margin contribution from brokerage commissions and from net income from financial instruments decreased compared to the level seen in the first half of 2021. The recurring fee income contribution to the gross margin was stable between these two periods, as was the contribution from net interest income. Credit quality remained high and there were no net credit impairment losses in the July-October 2021 period (after the CHF 1 million recorded for the first six months of 2021).
Further improvement in cost efficiency
The year-to-date expense development benefitted from the effects of the measures taken under the CHF 200 million gross cost-reduction programme announced in February 2020. Consequently, the adjusted cost/income ratio for the first ten months of 2021 improved to just over 63% (66% in full year 2020) and the adjusted pre-tax margin to 29 bp (27 bp in full year 2020).
Strong capital position
On 2 March 2021, Julius Baer launched a new 12-month programme to buy back up to CHF 450 million purchase value of Julius Baer Group Ltd. shares. By the end of October, a total of 4,832,000 shares had been repurchased at an aggregate cost of CHF 294 million, representing a significant increase from the CHF 77 million repurchased in 2020.
Despite the substantially increased share buy-backs and the higher dividend accrual to reflect the significant growth in profitability, the Group’s BIS CET1 capital ratio rose to 16.7% at the end of October 2021 (end 2020: 14.9%). At the same time, and partially on the back of the successful issuance in September 2021 of a new USD 320 million AT1 bond (at a record-low coupon for a European USD AT1 issuer), the BIS total capital ratio went up to 24.1% (end 2020: 21.0%). At these levels, the BIS CET1 ratio and the BIS total capital ratio remained well above the Group’s own floors of 11% and 15% respectively, and significantly in excess of the regulatory requirements of 7.9% and 12.1% respectively.
Even with these high levels of capitalisation, the adjusted return on CET1 capital remained significantly ahead of the 2022 target of >30% and among the highest in the sector.
*) Based on unaudited management accounts. This media release contains certain financial measures that are not defined or specified by IFRS, the definitions of which are provided in the Alternative Performance Measures document available at www.juliusbaer.com/APM.
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