Julius Baer Posts Record Profit as Client Inflows Double

Julius Baer Group AG reported its best first half on record as rising markets and client inflows fueled income from fees and commissions.

Net income in the first six months of the year rose 23% to 606 million francs ($658 million), the Swiss bank said in a statement Wednesday, broadly in line with what analysts surveyed by Bloomberg had expected. Net new money doubled to 9.9 billion francs, led by clients in Asia and Western Europe.

As elevated trading activity related to the pandemic levels off, Julius Baer is pushing deeper into the territory of UBS Group AG and Credit Suisse Group AG by seeking recurring business with the super rich. The focus on wealthy clients -- who benefited from soaring stock markets -- has shielded the bank from the worst fallout from the pandemic as well as from the huge Archegos-related losses that stung the investment banks of its larger Swiss rivals, particularly Credit Suisse.

UBS on Tuesday reported soaring second-quarter profit, bolstered by repeated fee income for helping manage assets and transaction-based earnings as clients boost trading. UBS cautioned that it expects lower activity in the third quarter compared with the second.

‘Element of Caution’

“The first half of 2021 in a sense has surprised us with all the activity that has happened out there, with continued very strong interest of clients in the markets,” Chief Executive Officer Philipp Rickenbacher said in an interview on Bloomberg TV. “We would apply the same prudence that we applied going into 2021 now going into the second half.”

The shares rose 0.4% at 9:01 a.m in Zurich trading, bringing gains this year to 13%.

Julius Baer had previously warned that client activity was already slowing to more subdued levels in April, after a strong first quarter. While clients who had cut risk in the early phase of the pandemic had taken on more leverage early this year, there was no “excessive lending,” the CEO said.

“There is plenty to go about with volatility, with client interest, but there is obviously also an element of caution,” he said.

Assets under management rose by 52 billion francs to a record 485.9 billion francs at the end of the first half, as the company benefited from surging financial markets. Net commission and fee income rose 12%, while net interest income declined 8% because of lower interest rates in the U.S.

Other key figures from Julius Baer’s first half:

  • Assets under management CHF485.9 billion, estimate CHF475.9 billion (Bloomberg Consensus)
  • Net new money gain CHF9.9 billion, estimate CHF8.54 billion
  • Operating income CHF1.99 billion, +7.7% y/y

Under Rickenbacher, the bank has been moving past a difficult period that saw an investigation into its Latin American business, and impairments to its Italian fund unit Kairos. It has been stockpiling cash for acquisitions or shareholder payouts, and regulators earlier this year lifted a ban on large scale acquisitions imposed on the bank to punish it for failings in money-laundering controls.

“We will see now, as the pandemic ebbs off over the course of one to two years, more opportunities out there in the market, we will be ready for those if they come at the right price, at the right quality, in the right markets,” Rickenbacher said in the interview. Asked whether he consider deals in the U.S., he said he was “always tempted by large markets with great profit pools.”

Julius Baer said in a separate statement Wednesday that it was acquiring 83% of Kuoni Mueller & Partner, an integrated real estate service provider in Switzerland, to extend its offerings in the country beyond mortgages. No price for the transaction was given.

Rickenbacher has said previously that the bank could consider deals that add as much as 100 billion francs of assets under management. The company also plans to buy back as much as 450 million francs of shares by February 2022. At the end of June, it had already spent 146 million francs.

©2021 Bloomberg L.P.

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