Lombard Odier has had a markedly lower first-half profit in 2019 even though assets under management surged. Patrick Odier, the senior partner of the private bank, says not to worry in an interview with finews.com.
The final quarter of 2018 was challenging for Lombard Odier, in line with pretty much every rival. The Geneva-based bank lost more than 5 percent of all its assets under management, which declined to 259 billion Swiss francs ($264 billion) by the end of the year.
The figures presented on Wednesday tell the story of the market recovery – at the end of June, Lombard Odier had 287 billion francs in assets under management, an increase by 11 percent from the end of 2018. The bank used the gains on the markets to the advantage of its clients. And it also received about 10 billion francs in net new assets.
Making Up for Lost Ground and More
Senior Managing Partner Patrick Odier commented: «It paid off to keep the investment strategy for our clients following the slump on the markets at the end of 2018: that way, they were able to profit from a strong performance in the first half of 2019 and last year's decline was more than offset.»
Surprisingly, the bank wasn't able to turn the increase it generated for its clients into its own advantage. Revenues dropped slightly to 581 million francs and profit even dropped by 10 percent to 72 million francs. The company said one factor for this drop was a decline in client activity.
Guideline: Acting in the Interest of the Client
Odier says that this isn't running counter to the intentions of the bank. «We don't see lower client activity, as witnessed in general, as a problem,» said Odier, who will hand over the reigns to Hubert Keller in 2022. «It is a conscious result of our conviction to maintain an investment strategy over the medium and long term in the interest of our clients.»
In other words: Lombard Odier doesn't do what is a widespread practice, namely shifting around client portfolios several times a year in a bid to maximize profits. Odier is convinced that this is in line with what all private bankers proclaim to do, namely act in the interest of clients.
60 Percent Advisory-Mandates
The strong showing of net new assets is also due to this approach, Odier believes. He adds that the banks has invested strongly in advisory capacities, which is paying off.
Lombard Odier has a proportion of advisory mandates of 6 out of 10, a figure that rival private banks will feel envious about. Advisory mandates are advantageous because the fixed fee reduces the bank's dependence on client activity.
The company is also adamant to maintain its investment strategy and to integrate sustainability as a focus in investment processes across the group. This, the bank hopes, will further boost the level of advisory mandates.
Syz auf der Plattform
The bank will only tell in its annual report where it managed the strongest growth rate – in wealth management or asset management. What's known is that private banking oversees 160 billion francs, while asset management has 50 billion under management.
Unusually, Lombard Odier also counts third-party assets managed through its banking platform G2 – a total that reached a total of 56 billion francs at the end of 2018. Odier told finews.com that the bank now added Bank Syz as a new partner.
The bank, a company rich in tradition and not exposed to the desires of external shareholders, has turned its attention to the management of its operating costs in recent years. Odier said that this continued into the first half of 2019 and helped the bank achieve a better cost-income-ratio as a consequence. The banker didn't say what the ratio had been – the starting point at the end of last year was 81 percent.
Lombard Odier won't likely come with strategic moves, not even in the light of an uncertain market environment and a slowing global economy – because the bank will stick to its conservative business model and keep building its customer base.
