Swiss private banking giant Julius Baer has reported a 14% increase in its AuM for 2014, reaching a record CHF 291bn ($312bn).
The new figure includes CHF 60bn of AuM reported from the completed integration of the Merrill Lynch’s international wealth unit (IWM), of which CHF 58bn were booked on the Julius Baer platforms.
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Julius Baer said the growth in total AuM was attributable to net new money of CHF 13bn (5%), a positive currency impact of CHF 11bn, positive market performance of CHF 6bn, as well as CHF 6bn from the first-time consolidation of Brazilian subsidiary GPS.
As a consequence of the Swiss franc appreciation, Julius Baer has also launched an ‘efficiency programme’, which aims at cutting costs of approximately CHF 100m ($107m) on a run rate basis.
"While the integration of the IWM business has substantially improved Julius Baer’s revenue and cost currency mismatch, the existing relative imbalance means that measures are required to mitigate the impact on the group’s profitability of the strong appreciation of the Swiss franc in January 2015," the bank said in a statement.
According to the move, Julius Baer will perform a "controlled hiring and resource reallocation" by cutting approximately 200 positions through "natural attrition" and "staff reductions" in mid- and back-office functions, Julius Baer added.
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By GlobalDataThe Swiss group also said planned savings of general expenses will be achieved through the short- and medium-term improvement of processes across the group as well as through lower marketing spending.
Boris F.J. Collardi, chief executive of Julius Baer Group Ltd., commented on the full-year results: "In 2014 the Group successfully realised the considerable synergies offered by the IWM transaction and in so doing significantly strengthened the basis for further long-term growth in the profitability of its business. This robust foundation is reinforced by a continued very solid capital position.
"As a consequence, Julius Baer will be able to confront the effects of the recent Swiss franc appreciation from a position of great strength."
Julius Baer recently said that it did not suffer any losses soon following the Swiss central bank’s decision to abandon a three-year-old cap on the franc.
In a statement, the bank said it was able to "manage successfully the enormous volatility and volumes" generated by the Swiss National Bank ‘s (SNB) decision on 15 January 2015 to discontinue the minimum exchange rate of CHF1.20 per euro.
In October 2014, Julius Baer said it was planning to slash a further 150 jobs by 2015 following its acquisition of IWM business.
In the full-year resuls, the bank reported that, following the IWM integration-related rightsizing, the number of relationship managers (RM) declined by 42 to 1,115, of which 316 formerly from IWM (down from 365 at the end of 2013). As a result of these developments, adjusted personnel expenses went up by 20% to CHF 1,182m.
As for the other results, operating income at the bank rose by 16% to CHF 2,547m, resulting in a gross margin of 94 basis points (bps). The adjusted cost/income ratio2 improved to 69.9%, the group reported.
Adjusted profit before taxes improved by 21% to CHF 706m with adjusted net profit growing by 22% to CHF 586m. In 2014, adjusted earnings per share rose by 20% to CHF 2.68.
As a result, the adjusted cost/income ratio of the bank improved to 69.9%, just inside the 65-70% range meeting the bank’s target for 2015.
IT modernisation
As reported in the bank’s results presentation, Julius Baer has also decided to renew its IT platforms globally. The bank has selected Temenos to initiate planning of its core banking platform replacement.
The aim of the project is to deliver improved client experience, operating efficiency and flexibility through the harmonisation of processing platforms, Julius Baer said.
David Arnott, CEO at Temenos, added: "We are delighted to have been chosen by Julius Baer as their global partner for IT modernisation. The private wealth industry is undergoing a major structural shift. Regulatory burdens are rising at the same time as customer expectations are changing, driven by younger and more technically-savvy consumers."
The project will be launched in Asia first, which is a fast-growing and dynamic region with volumes representing close to 25% of the bank’s business and thus serves as an ideal template for future implementation in other regions after its anticipated completion in 2017.
