Bank Julius Baer has shown persistence in establishing its presence in Germany. And it is not least the tough regulation that has helped the Swiss private bank become a successful player.
Julius Baer, the Zurich-based private bank, is currently engaged with solving a few problems, after years of going from success to success. The business and activities in Germany however don’t follow this trend for sure. Julius Baer is bidding to become the most important player alongside UBS in Europe’s arguably most attractive private-banking market.
While global big hitter UBS this year reduced its presence in Germany after years of unfettered expansion, Julius Baer has opened two more branches: Hanover and Berlin brought the number of its offices in Germany to ten.
Asked about a possible eleventh branch, Heiko Schlag, the head of private banking Germany and chairman of Julius Baer Europe, told finews.com that the strategy wasn’t about stacking up branches.
Great Start for Berlin
Both Hanover and Berlin had been opened because the bank was able to assume teams of relationship managers. Berlin has already yielded assets under management in the triple digits, Schlag said. And that’s despite the reputation of the capital – Berlin isn't known as a private banker’s paradise. Klaus Wowereit, the ex-mayor of Berlin, famously said: «Berlin is poor but sexy.»
Julius Baer sensed an opportunity though. «Wealth has clearly increased in Berlin over the past years, a consequence of the very lively startup scene in the capital,» said Schlag. And it isn’t just Berlin that’s performing well.
Performance Across All Branches
All branches and bankers have done their bit this year – with net new money measuring up to 1.5 billion euros ($1.69 billion). Assets have also increased by more than a billion despite the difficult market conditions. Julius Baer doesn’t provide a figure for assets under management – it is likely to be a low double-digit figure.
Schlag also didn’t say whether the German business had been profitable in 2018 after years of losses. He did however say that revenues had risen by a double-digit percentage figure.
After all, the head of the bank in Germany, 54 this year, was forced to spend a significant amount of money to make the business grow. Julius Baer has some 200 members of staff in Europe’s largest market, 80 of which work as relationship managers.
IT, Digitization, Regulation – It All Costs Money
The company also is investing in IT and digital services, boosting operating costs. The tougher regulatory requirements also added to the need for investments, Schlag said.
Germany this year implemented the MiFID-II-rules, which mainly help protect customers and investors while adding to the administrative burden for the provider of the services. The consequence are lower margins and earnings per client.
A trend that hasn’t escaped the Swiss private bank, but that also has helped it win more clients. Schlag said that numerous rivals had stopped their advisory business after the introduction of MiFID-II.
Blessing in Disguise
The investments required by the introduction of the new rules mainly prompted savings banks and Raiffeisen banks to stop providing wealth advisory services.
As such, the higher requirements actually turned out as a blessing in disguise for Julius Baer in Germany. The 500 clients it has gained more than compensated for the structural decline in revenue and the bank is also less prone to suffer from the aggressive price war among private-banking companies in the country.
Those among the wealth management firms that tried to gain market share by cutting their fees suffered badly from the increase in costs.
