The Zurich-based private bank's half-year results  beat market expectations. The bank's success in winning net new money from existing and new clients was mixed.

Operating income inched 1 percent higher to 1.43 billion Swiss francs, Julius Baer said in a statement on Monday. 

The bank's gross margin declined four basis points to 95 basis points from a year earlier due to fewer client transactions and trading. However, the margin rose nearly seven basis points on the second half of last year on higher trading revenue, which was boosted by stronger foreign exchange trading surrounding Britain's vote to exit the European Union four weeks ago.

Profits Beat

Net profit soared to 362 million francs, because the year-ago period was burdened by 350 million francs  to provide for a tax settlement with U.S. authorities, which the bank resolved earlier this year.

The result beats market expectations: analysts had expected a net profit of 311 million francs.

Managed assets rose in the first six months to 311 billion francs, which is 4 percent higher – or 12 billion more – than at year end. This also surpassed analyst expectations.

New Money Misses Target 

Fresh money from clients, the lifeblood of future revenue for banks, improved towards summer following a weak trickling early in the year, the bank said. Julius Baer posted a 3.7 percent annualized rise in net new money for the six months, which is below its target range of between 4 and six percent.

The bank won money in Asia, the Middle East, central and eastern Europe, local units in Switzerland, Germany and Italy, as well as from cross-border clients in Europe.

However, a feeble result in Latin America, deleveraging by clients in Asia as well as continued sweeps of untaxed accounts in France and Italy ate into those gains, the bank said.

Unchanged Spending

Baer's adjusted cost-income ratio was unchanged at 64.7 percent, smoothed by a 63 million franc contribution from an amendment in pension fund accounting. Without this boost, Baer's cost-income ratio would have worsened to 69.1 percent, reflecting a lower gross margin on assets as well as stepping up investments, the bank said.

The bank's total capital stood at 3.5 billion francs at the end of June, translating to a common equity Tier 1 equity ratio of 3.3 billion.

Strong Capital

Taking Baer's risk-weighted assets into account, the bank recorded a capital ratio of 17.3 percent and a common equity Tier 1 ratio of 15.9 percent when applying 2019 rules.

This puts Baer over its own targets of 15 and 11 percent, respectively, and well over the regulator's minimum requirement, which is 12.2 and 8 percent, respectively.