Julius Baer has reported an enormous drop in first-half revenue, which the Swiss wealth supervisor blamed on “one of the worst six-month periods for capital markets in decades”.
The financial institution reported a 26 per cent fall in internet earnings to SFr450mn ($468mn), lacking estimates, as nervous clients deleveraged their portfolios and retreated from dangerous inventory market trades. Its belongings underneath administration additionally declined by SFr54bn to SFr428bn.
“This decrease was driven by the significant corrections in global equity and bond markets,” chief government Philipp Rickenbacher stated. “In Asia and the Middle East we saw [from clients] a very pronounced deleveraging up to March, we had substantial elimination of credit positions.
“However, the interesting thing for me is how fast these things happen, but also how fast they reverse,” he added, pointing to internet new cash inflows of SFr1.5bn because the finish of April as a purpose for optimism.
The efficiency to date this yr stands in stark distinction to 2021, when Julius Baer reported report annual revenue as rich buyers took on extra threat and pumped cash into surging inventory markets.
But many buyers at the moment are staying on the sidelines due to a possible world recession, accelerating inflation, rising rates of interest and the conflict in Ukraine.
Its earnings are additionally a sign of what to anticipate from its bigger rivals UBS and Credit Suisse, which report outcomes on Tuesday and Wednesday respectively.
Shares in Julius Baer initially fell greater than 5 per cent, however recovered to commerce 2.1 per cent larger by mid-morning. It stays one of many best-valued world wealth managers regardless of falling roughly 1 / 4 this yr.
“This environment will clearly separate the wheat from the chaff,” Rickenbacher stated in an interview. “There are plenty of M&A opportunities in the market, but the question is when they will materialise. I think midsized players are now in challenging territory, many need to make investments . . . we are well positioned to take advantage of this.”
The decline in first-half earnings from consumer buying and selling exercise was partially offset by an 11 per cent enhance in internet curiosity earnings, pushed largely by larger earnings from rising US charges.
Operating prices additionally rose because the financial institution took a SFr55mn provision to settle a historic Lithuanian embezzlement case, however employees bills fell because it lower the quantity put aside to pay bonuses and imposed a hiring freeze on all however front-line wealth relationship managers.
The outcomes had been “clearly below estimates on lower than expected revenues and higher expenses”, stated Vontobel analyst Andreas Venditti. “A hiring freeze for non-relationship manager positions suggests no quick recovery expected.”
As with many worldwide corporations and due to Russia’s invasion of Ukraine, Julius Baer has “initiated the wind-down of its advisory subsidiary in Moscow”, which has a internet asset worth of SFr1.2mn.
Rickenbacher stated “direct sanction impact” has been “low”. The financial institution has recognized about SFr900mn of buyer cash that’s affected.