Julius Baer said it will cut more than 100 jobs as part of spending cuts as well as lower a key profitability target. The Swiss private bank said it will nevertheless hike payouts to shareholders.
The Zurich-based wealth manager said it will cut 2 percent of its work force by the end of this year, in a bid to bring its bloated spending under control. This translates to roughly 134 of its current 6,693 employees, part of 100 million Swiss francs ($100.4 million) in spending cuts.
CEO Bernhard Hodler is also forced to lower Julius Baer's targets little more than one year into his tenure: while the bank said it still targets growth in net new money of 4 to 6 percent, it said it can no longer meet a pre-tax margin of more than 30 basis points. Instead, the bank now targets up to 28 basis points for the measure (it hit 24.8 in 2018).
«We continue to make strategic growth investments, and have initiated a structural cost reduction program to absorb revenue fluctuations from potential market headwinds over the short to medium term», Hodler, who had flagged the miss in November, said.
Details on Cuts
The bank said full-year profit rose less than 3 percent on the year to 735.3 million francs. Julius Baer's nearly six percent climb in spending outpaced a 3.6 percent rise in revenue, causing it to crash out of its cost-income target.
The wealth manager hit its target for net new money by hoovering up 17 billion francs last year – a rate of 4.5 percent growth on existing funds. But those funds receded by nearly 2 percent to 382.1 billion on the year due to unfavorable markets.
The bank said the cuts will result from sharpening its market focus as well as how it prioritizes its resources, automation and digitization, and applying stricter performance management measures. It had reportedly told its private bankers last year that they would have to work harder for their bonus.
Shareholders Profit
Julius Baer expects the improvements to feed into next year's results, when it targets a cost-income ratio of less than 68 percent, compared to 70.6 percent last year. It also introduced a new target of more than 32 percent return on its capital, in a bid to link up profitability, how efficiently it uses its capital, and capital return ambitions.
Despite the miss, Julius Baer said it will lift payouts to shareholders to 1.50 francs per share, the fifth consecutive year shareholders have seen a higher dividend. The bank also said it will attempt to put its U.S. tax wrong-doing behind for good: it will ask U.S. prosecutors to dismiss a two-year settlement agreement which runs until this week.
