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Julius Baer posts record H1 profit but shares slip on fears boost might be unsustainable
FRENETIC client trading as the Covid-19 pandemic took hold helped Julius Baer deliver record first-half profits, but its shares fell on concerns that the boost was unsustainable and falling revenues elsewhere could leave the bank exposed.
The Swiss wealth manager reported a 4 per cent jump in half-year net profit to 491 million Swiss francs (S$726.7 million) on Monday, as the pick-up in client activity more than offset a drop in lending and a hit from falling US interest rates. The bank also made a 49 million franc provision for credit losses.
"When we look into the second half of this year from a market perspective ... not everything is clear, but what is clear is that the recovery patterns will be heterogeneous," Philipp Rickenbacher told journalists.
With political risks also high, "this is going to create an environment which is prone to a degree of volatility", he added.
Julius Baer shares dipped 4 per cent in morning trading as analysts worried that the surge in trading might not last.
"The dependence on trading in the earnings increase is certainly a drag," Zuercher Kantonalbank analysts said in a note, adding that a drop in gross margins in May and June did not augur well for the second half.
Julius Baer had already announced in May that an "exceptional increase" in trading had allowed it to offset the impact of sliding markets and a strong Swiss franc eating into its assets under management (AUM).
Switzerland's third-largest listed lender said on Monday that AUM fell 6 per cent from the end of 2019 to 401.8 billion francs at the end of June. That was despite inflows of 5.0 billion francs, particularly from clients in Europe and Asia.
Lending had picked up since May, chief financial officer Dieter Enkelmann said, adding that Julius Baer expected net interest income to remain near May and June levels during the second half. REUTERS