EFG International's profit shrank as the Swiss private bank bled for past deals. It is aggressively hiring private bankers to lead back to growth.
Zurich-based EFG International said net profit for the first half dropped to 31.5 million Swiss francs ($32 million) from 46.4 million francs year ago. The result includes an 13.6 million franc gain from dividends and gains from revaluing its seat on Switzerland's stock exchange SIX.
Profits were hit by a write-down on a life insurance portfolio due to accounting changes, legal costs and provisions for its 2015 acquisition of troubled rival BSI, and another deal-related charge.
Hiring Spree
Revenue at EFG, which is majority-owned by the wealthy Latsis Greek shipping clan, slipped nearly 3 percent to 555.8 million francs. It handily offset this with a 5 percent cut in spending, including by cutting nearly 60 jobs since year-end.
At the same time, EFG said it more than doubled hiring in the first half of private bankers: the bank either hired, signed contracts for, or approved recruiting 94 new advisers in the six months. One of them is Angela Bow, an Asia veteran whom EFG snapped up from Julius Baer last month.
Missing the Mark
EFG CEO Giorgio Pradelli (pictured below) targets growth in net new money of at least 4 percent. The wealth manager missed the mark in the first half with 300 million francs in fresh funds, which translates to 0.3 percent. Overall assets ballooned to 147.6 billion, up more than 12 percent on year-end largely due to an April acquisition and favorable market swings.
Pradelli has opened or relaunched branches in Lisbon and Milan and wants to enter the United Arab Emirates. He now faces the challenge of ensuring EFG's new private bankers turn a profit quickly.
Sky the Limit in Pay
The bank operates on a distinctive model which effectively treats each adviser like a profit-and-loss center. For experienced and motivated bankers, the model is attractive because the sky is the limit in terms of pay.
Part of Pradelli's plan for growth is to expand the external asset manager segment in Switzerland, which has proven lucrative for private banks. He also snapped up Australian wealth manager Shaw earlier this year, in a bid to kickstart growth in Asia-Pacific.
