Assets under management up 11% to CHF 189 billion, a record high – Net new money CHF 9.7 billion – Adjusted net profit CHF 433 million – IWM integration on track
Assets under management (AuM) increased by 11% to a new record high of CHF 189 billion. The increase was the result of a significant positive market performance, net inflows of CHF 9.7 billion (5.7%), and a slightly negative currency impact. Total client assets (including assets under custody) grew by 7% to CHF 277 billion.
Operating income decreased by 1% to CHF 1,737 million, while average AuM went up by 8%, resulting in a gross margin of 96 basis points (bps) (2011: 105bps). The lower gross margin was a direct consequence of a further reduction in client activity.
Adjusted operating expenses declined by 5% to CHF 1,216 million as the expenses in 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 adjusted operating expenses were flat.
As a result, the adjusted cost/income ratio went up to 71% (2011: 68%).
Adjusted net profit including the 2011 Germany payment increased by 8% to CHF 433 million and adjusted earnings per share (EPS) by 11% to CHF 2.14. Excluding the 2011 Germany payment, adjusted net profit decreased by 4%.
IFRS net profit grew by 15% to CHF 298 million and IFRS EPS by 19% to CHF 1.47.
At year-end, the Group’s BIS total capital ratio stood at 31.6% and its BIS tier 1 ratio at 29.3%, helped by the pre-funding of the acquisition of Merrill Lynch’s International Wealth Management (IWM) business outside the US.
The Board of Directors will propose to the AGM on 10 April 2013 an unchanged ordinary dividend of CHF 0.60 per share.
The principal closing of the IWM acquisition took place on 1 February 2013. As a first step of the integration, Julius Baer acquired the Geneva-based Merrill Lynch Bank (Suisse) S.A. with AuM of around CHF 11 billion, taking Julius Baer’s AuM above the CHF 200 billion mark for the first time.
Boris F.J. Collardi, Chief Executive Officer of Julius Baer Group Ltd., said: “We remained well in favour with clients in all our markets in 2012. The resulting substantial net new money inflow near the top end of our target range underlines the fundamental strength of Julius Baer’s product and service offering, further leveraged by our strong brand name. This translated into solid financial results for the year. In addition to these ongoing business activities, we initiated the transition into Julius Baer’s next strategic phase of growth by acquiring Merrill Lynch’s International Wealth Management business outside the US, the integration of which is well on track.”
Total client assets grew by 7% to CHF 277 billion. Assets under management increased by 11%, or CHF 19 billion, to CHF 189 billion. The increase in AuM was the result of a) a positive market performance of almost CHF 11 billion on the back of significant improvements across many investment categories, especially equities, b) net new money of CHF 9.7 billion and c) a negative currency impact of CHF 1 billion, mainly due to the decline in the value of the US dollar towards the end of the year. At 5.7%, the net new money growth rate was near the top end of the 4-6% target range. As in previous years, while all market regions contributed positively, the majority of inflows originated from the growth markets – Asia, Latin America, the Middle East, Russia and Central & Eastern Europe. The Group’s local businesses in Germany and Switzerland also produced healthy inflows. Assets under custody ended the year at CHF 88 billion, unchanged from a year ago.
Operating income decreased by 1% to CHF 1,737 million as the increase in net commission and fee income and net interest and dividend income was offset by a decline in net trading income. Because average AuM (calculated on the basis of monthly AuM levels) went up by 8% to CHF 181 billion, the gross margin decreased from 105 bps in 2011 to 96 bps. Net commission and fee income went up by 4% to CHF 980 million, with the overall increase somewhat tempered by a further relative decline in client transaction volumes. Net interest and dividend income rose by 5% to CHF 559 million driven mainly by a continued increase in loan volumes as well as higher treasury income. Net trading income declined by 36% to CHF 173 million mainly as a result of a further decrease in client-driven FX trading following reduced volatility in the FX markets, especially in relation to the Swiss franc/euro exchange rate. Other ordinary results went up to CHF 26 million, after CHF 9 million in 2011.
Adjusted operating expenses went down by 5% to CHF 1,216 million. Excluding the 2011 Germany payment, adjusted operating expenses were unchanged. The total number of employees at year-end was 3,721, up 2% from a year ago, and the number of relationship managers grew by 11 to 806. Helped by lower performance-related payment accruals, the adjusted personnel expenses remained at CHF 788 million. Adjusted general expenses, including valuation allowances, provisions and losses, fell by 18% from CHF 425 million to CHF 349 million. Excluding the 2011 Germany payment, the 2011 adjusted general expenses were CHF 360 million, so the year-on-year decline would have been 3%, despite the inclusion of CHF 38 million of expenses in 2012 related to the US tax situation.
As a result, the adjusted cost/income ratio (2) rose to 71%, compared to 68% in 2011. Excluding the aforementioned expenses related to the US tax situation, the adjusted cost/income ratio increased to 69%.
Adjusted profit before taxes went up by 10% to CHF 521 million. The related income taxes increased from CHF 73 million to CHF 88 million, representing a tax rate of 16.9%, up from 15.4% in 2011. Adjusted net profit consequently increased by 8% to CHF 433 million, and adjusted earnings per share came to CHF 2.14, up by 11% from CHF 1.93 in 2011 (with the 2011 EPS restated in line with IFRS to reflect the change in the applicable number of shares resulting from the rights issue that was completed in October 2012). Excluding the 2011 Germany payment, adjusted profit before taxes declined by 3%, adjusted net profit by 4% and adjusted EPS by 1%.
As in previous years, in the analysis and discussion of the results in the Media Release and the Business Review, adjusted operating expenses exclude integration and restructuring expenses (CHF 57 million in 2012, down from CHF 65 million in 2011) as well as the amortisation of intangible assets related to acquisitions (unchanged at CHF 90 million). Including these items, as presented in the IFRS results in the Annual Report, net profit was CHF 298 million in 2012, up 15% from CHF 258 million in 2011, and EPS increased by 19% to CHF 1.47, from the restated CHF 1.24 in 2011.
Balance sheet and capital developments
Total assets increased by 4% to CHF 54.9 billion. Client deposits grew significantly by CHF 4.3 billion to a new high of CHF 39.1 billion, and the total loan book by CHF 3.4 billion also to a record high CHF 19.8 billion (comprising CHF 14.2 billion of collateralised Lombard loans and CHF 5.6 billion of mortgages), resulting in a loan-to-deposit ratio of 0.51. In 2012, the capital development benefitted from the year’s earnings as well as the new additional tier 1 and equity capital raised for the acquisition of IWM. This benefit clearly outweighed the combined capital outlay for the completion of the share buyback programme early in 2012 and for the special dividend paid in April 2012. As a result, total equity increased by CHF 0.6 billion to CHF 4.9 billion, BIS total capital by CHF 0.9 billion to CHF 3.9 billion and BIS tier 1 capital by CHF 0.9 billion to CHF 3.6 billion. Risk-weighted assets declined by CHF 0.4 billion to CHF 12.5 billion. As a result, the BIS total capital ratio (under Basel 2.5) increased from 23.9% to 31.6% and the BIS tier 1 ratio from 21.8% to 29.3%. Over the next two years, as the IWM client assets are transferred (and paid for) in stages and as the projected IWM-related transaction, integration and restructuring costs are expensed, the Group’s total capital and tier 1 ratios are expected to decrease to more normalised levels.
Unchanged ordinary dividend proposed
The Board of Directors will propose to the AGM on 10 April 2013 an unchanged ordinary dividend of CHF 0.60 per share. As was the case in 2011 and 2012, it is proposed that the dividend will be paid out of the share premium reserve. The distribution therefore would not be subject to Swiss withholding tax and, for Swiss individual investors who hold their shares as private assets, not be subject to income tax.
The results conference will be webcast at 9:30 a.m. (CET). All documents (presentation, a preprint version of the Business Review 2012 and the IFRS Annual Report 2012, and this media release) will be available as of 7:00 a.m. (CET) at www.juliusbaer.com. The final version of the IFRS Annual Report 2012 will be published on 15 February 2013.
Strengthening the Japanese private wealth business
In January 2013, Julius Baer strengthened its presence in the Japanese private wealth market through a 60% equity participation in TFM Asset Management Ltd. (TFM), a Swiss-registered independent asset management company. TFM was founded in 1996 and has offices in Tokyo and Zurich. The company holds investment advisory and investment management licences granted by the Japanese FSA and concentrates predominantly on serving Japanese high net worth private clients. TFM manages a few hundred million CHF of client assets. Julius Baer will have the right to take full ownership three years after the closing planned for April 2013. Both parties agreed not to disclose the purchase price.
15 February 2013:
Publication of the Annual Report 2012
10 April 2013:
Ordinary Annual General Meeting, Zurich
12 April 2013:
16 April 2013:
17 April 2013:
Dividend payment date
15 May 2013:
Publication of Interim Management Statement
22 July 2013:
Publication and presentation of 2013 half-year results, Zurich
Please note the disclaimer regarding forward-looking statements in the media release PDF attached on the right-hand side.
(1) The adjusted results as presented and commented in this Media Release and in the Business Review are derived by excluding from the audited IFRS financial statements the integration and restructuring expenses and the amortisation of intangible assets related to acquisitions or divestitures as well as the one-off charge related to the restructuring programme announced on 14 November 2011.
(2) Calculated using adjusted operating expenses, excluding valuation allowances, provisions and losses.