Julius Baer benefited from a boom in trading as well as structured products by wealthy clients during the onset of the pandemic.
The Zurich-based bank's profit in the first half surged 43 percent to 491 million Swiss francs ($523 million), it said in a statement on Monday. Commissions rose eight percent, but income from trading and structured products surged 70 percent; it also benefited from a lower tax rate.
«The changing market environment, including sharply higher market volatility, drove a strong increase in client activity in foreign exchange, derivatives, and precious metals trading as well as higher income from structured products,» it said. This more than offset a drop in interest income, while spending was largely unchanged on the year.
Savings Plans
Led by CEO Philipp Rickenbacher since September, the 130-year-old private bank had concluded a round of job cuts shortly before the coronavirus spread to Europe and the U.S., as part of a $207 million savings drive. This helped the bank to lift its gross margin by ten basis points to 92 points, and to lower its cost-income ratio to 66.6 percent, from 71 percent in the year-ago period.
Julius Baer backed its targets but declined to provide a specific outlook, saying the full economic impact of Covid-19 is still ahead but said it is confident of being «well prepared» for the second half of 2020. «We are well-positioned to maintain the stability of our business and reap opportunities when they arise,» it said, without elaborating.
Credit Loss Hit
The shadow over the profit surge is a 49 million franc provision against its loan book to wealthy clients – a fast-growing activity for wealth managers. Julius Baer said it managed its 46 billion lending book well during the margin calls that rained down on clients in March and April.
«Only one position with 2 million francs of uncovered exposure had to be provisioned,» Julius Baer said. «Apart from this, however, the individual provisions for some legacy
credit cases had to be further increased.»
Latin America Reversal
In the six months, Julius Baer's private bankers hoovered up 5 billion francs in net new money – including a reversal of outflows in its trouble Latin America business. The region has been at the center of recent troubles, and Julius Baer exited several markets like Venezuela where it got into trouble.
The private bank is grappling with the side effects of an era of heady growth, including several probes into its handling of money laundering attempts. Rickenbacher is steering Julius Baer's more than 1,400 private bankers away from growth-at-all-costs targets, as finews.com reported.
Fewer Private Bankers
Its overall assets slid six percent to 402 billion francs despite the 2.3 percent growth in net new money: the drop in financial markets, as well as the strengthening Swiss franc, wiped out the new funds won by its private bankers.
Julius Baer spent more on salaries, due to severance payments to the departing bankers as well as to higher bonus payments for the favorable first-half performance. It employs 1,456 private bankers, which is 11 less than at year-end. Overall staff rose to 6,729, from 6,639 in December.
