Julius Baer Asset Growth Slows as Hodler Cautions on Markets

(Bloomberg) -- Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, is counting on faster hiring to boost growth after net new money slowed under Chief Executive Officer Bernhard Hodler.

The Zurich-based private bank added 10 billion francs ($10.1 billion) in the first six months, a slower pace than a year ago, though within the bank’s target range. Net new money is a closely watched figure as an indicator for future revenue. The wealth manager hired 79 relationship managers, just short of its target for the entire year.

While the firm had enjoyed stellar growth through high-profile acquisitions and a hiring spree, analysts are questioning whether Hodler can sustain the success of former CEO Boris Collardi, who left for rival Pictet Group. The bank has also been grappling with cost and margin pressures, with Hodler warning of the risk of increased market volatility.

Julius Baer fell as much as 4.1 percent in Zurich and was trading 3.7 percent lower at 54.74 francs as of 9:10 a.m.

Private banks grow assets mostly through hiring and acquisitions. Some analysts recently voiced concerns that Collardi will poach senior bankers. Hodler said in a Bloomberg interview that no key staff have been taken.

“Former CEO Boris Collardi only recently started at Pictet,” said Andreas Venditti, an analyst at Vontobel. “We believe any potential negative outcome related to his move to a competitor, for example the poaching of key staff, might only be visible in full-year results and is neither reflected in our estimates nor in consensus.”

Baer Acquisitions

The bank earlier this year agreed to acquire 95 percent of Sao Paulo-based Reliance Group -- which added assets and relationship managers -- and announced a partnership with Thailand’s Siam Commercial Bank. Since 2012, Julius Baer acquired the international operations of Bank of America Merrill Lynch in its largest deal, the European operations of Bank Leumi Le-Israel BM and Commerzbank’s Luxembourg business.

Assets under management at the bank rose 3 percent to 400 billion francs from the end of 2017. All regions recorded net inflows, with particularly strong contributions from clients in Europe, Switzerland and Asia. That was slightly offset by deleveraging by clients in Asia and the Middle East, reflecting a more cautious positioning of their portfolios as the U.S. increased interest rates.

The firm’s growth has raised compliance issues. Swiss financial regulator Finma is conducting enforcement proceedings and earlier this year the firm said that the head of the bank’s representative office in Russia was put on leave after being implicated in actions that prompted Swiss prosecutors to conduct a dawn raid and probe of state-owned arms maker Ruag.

Baer has said it plans to hire 80 relationship managers a year. This year, it has announced the opening of a branch in Hanover and hired relationship managers in Luxembourg and Germany. Net new money a year ago increased at a 6.1 percent rate.

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