Julius Baer warns of full-year goodwill hit as 9-month profitability rises

Zurich

SWISS wealth manager Julius Baer on Monday warned that full-year results will be hit by goodwill impairments related to its ailing Italian company Kairos as it reported an improvement in profitability for the first nine months.

The Zurich-based lender said it would book another 177 million-euro (S$282 million) goodwill charge from Kairos and would be making a number of investment managers minority shareholders in the asset and wealth management unit. Julius Baer will retain a 70 per cent stake.

Its shares, however, rose 5 per cent after the market opened, with analysts pointing to a beat across the board on metrics provided in its pared-back nine-month results and noting the positive effects of a strategy programme announced in February.

Fresh client inflows and a recovery in stock markets helped the Zurich-based lender stem a fall in managed assets unleashed by the Covid-19 pandemic, with assets under management rising 3 per cent to 413 billion Swiss francs (S$614.6 billion) since June.

"Supported by ongoing active client engagement, operating income was considerably higher in the first nine months of 2020 than in the same period a year ago," Switzerland's third-largest listed lender said in a statement.

The bank - which does not report nine-month profit - had previously seen a 43 per cent jump in half-year net profit to 491 million Swiss francs, as a pick-up in client activity more than offset a drop in lending and a hit from falling US interest rates.

"Baer's nine-month statement demonstrates continued benefit from a constructive client activity backdrop whilst also (over)delivering on the promise of its 2020 strategic plan," Jefferies analysts said in a note.

Julius Baer said gross margins in the third quarter had remained consistent with levels seen during May and June, helped by high levels of client activity despite slower loan growth.

Its adjusted cost-income ratio stood at 66.1 per cent through September, an improvement from the 71.1 per cent posted for full-year 2019 and ahead of the 67 per cent it said in February it aimed to achieve by 2022. REUTERS