Julius Baer Enjoys Rare Trading Boom to Lift Profitabilty

(Bloomberg) -- Julius Baer Group Ltd. joined rivals in reporting a boom in client trading, lifting profitability at Switzerland’s third-largest wealth manager to the highest level in four years.

An “exceptional increase” in trading volumes in the first four months boosted margins even as the lender cautioned it can’t predict the impact of the coronavirus on profit for the rest of the year. The gross margin rose to the highest level since 2016. The shares jumped by the most in a month.

Wealth managers have reported a better-than-expected start to the year as wealthy clients sought to limit damage or make opportunistic bets when the coronavirus wreaked havoc on markets. Like rival UBS Group AG, Julius Baer’s focus on managing assets for the wealthy means it faces limited risk from corporate and consumer defaults that now threaten European and U.S. peers.

“It is clearly too early to assess with any certainty the impact of the Covid-19 crisis on the global economy, the financial markets, and the results of Julius Baer for the remainder of 2020,” Chief Executive Officer Philipp Rickenbacher said in a statement Tuesday.

Julius Baer jumped by as much as 9.6% in Zurich trading and was up 5.9% at 39.11 francs as of 9:48 a.m. That cuts this year’s decline to about 22%.

Profit Strategy

After a decade of expansion under Boris Collardi through 2017, Rickenbacher plans to eliminate 300 jobs across the bank this year and set out a strategy that envisions boosting profit while assets grow more slowly. The bank has spent the last two years dealing with the fallout of a probe into a money-laundering scandal in Latin America that culminated in a reprimand from the Swiss regulator in February.

Net new money grew 2%, the company said. The Swiss private bank earlier this year dropped a new money target after missing its goal last year. Instead, it introduced a new objective of 10% annual growth in pretax profit. The gross margin, a key measure of profitability, rose to 95 basis points from 82 basis points a year earlier.

Despite the new money, assets under management declined by 8% to 392 billion Swiss francs ($403 billion) this year due to a negative market performance and the strength of the franc against the euro, pound and the Brazilian real, the company said.

A first dividend payment was approved on May 18 and a second tranche will be proposed in November barring a drastic change of circumstances, the company said.

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