Julius Baer CEO Philipp Rickenbacher tells finews.com how soon investors can expect an acquisition from the Swiss wealth manager and what he thinks of merging with Credit Suisse.
Philipp Rickenbacher, were you driving with the handbrake on in your first two years in the job due to Finma's restrictions?
In some areas, yes, but overall no. We developed unbelievable momentum in the last two years. We decided at the beginning of last year to accelerate our transformation agenda and were able to execute it quickly. That was tangible in our results. The pandemic also enabled up to find new touchpoints with our clients.
Net new money was lackluster during this time.
At a time when we had to suddenly become «remote,» it's difficult to acquire new money, so that's certainly an example of a handbrake. We solved this in that we generated more business with existing clients.
What are your plans on mergers and acquisitions, after Finma lifted a restriction on major deals?
We certainly want to keep growing. Private banking is a growth business, globally we're seeing new wealth being generated. In that respect, demand for our services has never been greater. Against this backdrop, I am optimistic for our industry. And thus, it's only logical to think about how we could grow.
Namely?
We can grow organically by expanding our business ourselves – new client advisers acquiring new clients. That's always going to be an integral part of our strategy. We'll also keep promoting our own young talent.
«Nobody wants to get out of the wealth management business right now»
Acquisitions are another option. We have 15 core markets globally. Should we have the option to generate a sizable critical mass in one, with the right quality, at the right price, and with the right people, then we'll certainly do it. But we also have to be aware that we're not in a buyer's market. Nobody wants to get out of the wealth management business right now – for good reasons and bad.
What could an M&A target look like for Julius Baer?
It's about growth in our core business. That requires the right client segments, quality of clients, in terms of documentation and regulatory. I don't want to have to do another «Atlas» program. Then we need competent client advisers, modernity, ultimately the right culture, the fit, and of course the price has to be right.
How many billions in client assets are you thinking of?
Targets should have enough size to be relevant. At our total assets of nearly $550 billion, acquisitions of several billion in assets don't make sense.
«I don't see Julius Baer as a takeover candidate at all»
Julius Baer has done three genuinely transformative integrations in the last 15 years: the private banks of UBS, then ING, and finally Merrill Lynch's international wealth management business. It wasn't 15 acquisitions and one per year, but one every four or five years. We should keep that in mind when we think about future acquisitions.
A merger of Julius Baer and Credit Suisse regularly emerges in speculation. Do you want to set the record straight?
I don't view Julius Baer as a takeover candidate at all. The market approves of our strategy as the right one meaning, we have our price. Our independence is also the right business model for us. The universal banking model of major firms certainty has its merits, but it is a different one than ours. We have our independence to thank for our current strength.
How worried are you about the home market, where you aren't where you could be or want to be?
In Switzerland, I do indeed see a larger and particularly a broader role. I wouldn't call the Swiss market a worry. A lot of our growth in recent years was booked on the domestic platform, but this means that the Swiss focus was diluted. We can still work on the balance between the Swiss and international business.
How?
To be closer to clients, for example with pension solutions. It's more a question of how do we get our products and solutions to clients than it is whether we have them in the first place.
«We need to remember that China is a market where you can lose a lot of money very easily»
That means showing our presence more. Maybe one day we'll have a building in Zurich that we'll paint red and white to emphasize our Swiss business.
Where do you stand with Kairos in Italy?
We bought Kairos nearly ten years ago with the intention of expanding our presence in Italy. We're fulfilled that. In the last 18 months, it's been about finding the right basis for Kairos to be successful.
What do you want to get out of Kairos?
Kairos stands for asset management competence. In that respect, it's not a continuation of the private banking model of Julius Baer in Italy, but an independent business area for Italian clients and more.
China is the second-largest private banking market in the world. Would you see a presence there?
Never say never, but the question is on what time horizon we want to achieve that. We need to remember that China is a market where you can lose a lot of money very easily like many major banks have experienced. How many foreign ventures in China today are creating sustainable value?
Is the political situation in Hong Kong cause for concern?
We're monitoring that very closely. There have been demonstrations regularly for several years, but more recently we've seen a period of calm. Our business has until now not suffered from this. We're very clearly positioned and look very closely at which clients we do and don't want to work with.
What clients aren't welcome at Julius Baer?
A question we ask ourselves repeatedly is how strongly we want to connect with politically exposed individuals.
«Should we take in step in the U.S., several conditions would have to be met»
We've been very conscientious in the past about what we do and don't offer. That paid off in terms of a solid business that I don't worry about.
Other banks seem to be shifting to Singapore, but Julius Baer isn't.
No, we built both Hong Kong and Singapore in parallel, so that we could work with the appropriate resources. This will remain that way.
How tangible are Julius Baer's plans for the U.S. wealth market?
The U.S. is the most competitive wealth management market in the world and one where nobody's waiting for a foreign entrant – something many foreign banks have had to learn painfully. Like China, it requires major caution and consideration. Julius Baer is doing well in both markets, even without a physical presence, and there is potential to grow. Should we take in step in the U.S., several conditions would have to be met.
Namely...?
We need the right business model and entry point. I'm not ruling that out categorically, but we have no strategic imperative to expand in the U.S.
«Bitcoin isn't the new gold from tomorrow»
That affords us the luxury of waiting for the right moment – in case it arrives. The Chinese, as well as the U.S. market, require the long view. We can't force anything, otherwise, we're on our way to destroying value.
What will Julius Baer look like in five years?
The client and personalized advice will be at the center of what we do, but many of the building blocks might not be in the same place in a few years. If you look back ten years, nobody talked about Robinhood or could imagine trading U.S. stocks for free. Unter this premise, we'll see a further commoditization for example in custody and brokerage. We're also seeing digital assets playing a more important role.
How do you view cryptocurrencies?
I don't think that bitcoin or ether are going to be the new gold tomorrow, but I also don't believe they're going to disappear. We're going to see unbelievable developments, but a lot of questions are open. The keywords are tokenization, DeFi, digital central bank coins, or the intersection of fiat money and digital assets.
Do you see banks disappearing because they are no longer in a position to counter these challenges?
In the long run, yes, but consolidation is frequently overvalued. People said 30 and 40 years ago that the independent asset management industry would disappear – it certainly didn't. It also doesn't make sense to declare the death of banks. However, the pressure to transform remains high.
Philipp Rickenbacher has run Julius Baer since September 2019. Previously, he was in several management roles for the Swiss wealth manager since 2004, except a brief stint at GAM from 2008 to 2009. He studied biotechnology at Zurich's ETH and began his career at Swiss Bank Corporation (now UBS). Rickenbacher was a consultant with McKinsey from 1997 to 2004. Since 2020 he is also the Chairman of the Association of Swiss Asset and Wealth Management Banks.
