Private Bank Julius Baer is attracted net new money in recent months, putting it on course to attaining its profitability targets for this year. Higher interest rates are supporting gross margin improvement.

Zurich-based private bank Julius Baer said that an improvement in new net money inflows which started at the end of June strengthened in subsequent months despite the further client deleveraging and challenging market conditions, the firm said Monday in its interim statement for the first ten months of the year. 

Higher interest rates supported an improvement in the firm's gross margin. In the July-to-October period, the gross margin improved to nearly 91 basis points, bringing it to 85 basis points for the year to date, which is an increase of 3 basis points from the full year of 2021. 

Managed Assets

Since the end of June, Julius Baer attracted 4.1 billion Swiss francs ($4.3 billion) of new money in the following four months, which helped offset the 1.1 billion francs outflow during the first half. As a result, year-to-date new money amounted to 3 billion francs.

Despite the inflows, assets under management  (AuM) are down 52 billion to 429 billion as of October 31, driven in large part by a 67 billion franc impact from declines in stock and bond prices. In addition, 7 billion was accounted for by minor corporate divestments. 

Partially compensating for the AuM decline as a positive currency impact of 19 billion, resulting mainly from the strength of the dollar versus the franc. 

Sanctions Impact

During the first ten months of the year, Julius Baer reclassified 1 billion francs of AuM as assets under custody following the freezing of assets from sanctions imposed on clients in connection to the invasion of Ukraine.

Targets Within Reach

During the first ten months, Julius Baer's adjusted cost/income ratio was slightly above 66 percent, compared to 64 percent for 2021. Adjusted pre-tax margin fell below 26 basis points from 28 last year. The respective targets are below 67 percent and 25 to 28 basis points for the 2020-2022 strategic cycle.

«With the year-to-date gross margin improvement, as well as the benefits materializing from the revenue, productivity, and efficiency measures implemented in the first two years of the strategic cycle, achieving these targets remains well within reach ‒ despite the year-to-date decline in client assets,» according to the statement.