Julius Baer sees more volatility to come after record profit

[ZURICH] Julius Baer Group Ltd. posted its best ever first-half profit as sharp asset price swings linked to the coronavirus boosted client trading and said it expects the volatility to persist through the remainder of the year.

Net income jumped by 43 per cent from a year earlier to 491 million Swiss francs (S$727 million), with commissions and fees as well as income from currencies, derivatives and precious metals trading rising sharply, the Swiss private bank said in a statement on Monday. The trading increase helped the bank overcome a decline in net interest income.

"There are a few ingredients in the second half that can truly drive volatility," Chief Executive Officer Philipp Rickenbacher said in an interview with Bloomberg TV. "There is going to be stimulus in the market, there is going to be political uncertainty."

Julius Baer's earnings may signal how the world's biggest wealth managers have fared as the coronavirus whipsawed markets and generated record revenues from client trades. UBS Group AG reports earnings on Tuesday, with Credit Suisse Group AG to follow on July 30. With the trading bonanza expected to fizzle out eventually, banks are now turning their focus to costs to shore up future profits.

Mr Rickenbacher, less than a year into the job, has pledged to focus on profitability and boost the bank's reputation after a decade of breakneck growth under former boss Boris Collardi was followed by the Swiss regulator investigating Julius Baer's Latin America operations.

The CEO is now reviewing the bank's footprint after already announcing plans to eliminate 300 jobs this year. Two months ago Julius Baer said it agreed to sell its Bahamas operations and has hinted there may be more to come.

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The bank said its gross margin jumped to 93 basis points from 83 basis points a year earlier. Assets under management rose to 402 billion francs at the end of June compared with 392 billion at the end of April. The company said asset growth was affected by negative market performance and further strengthening of Swiss franc.

Julius Baer is targeting a cost-income ratio of 67 per cent or lower over the next three years, and an adjusted pre-tax margin of 25-28 basis points over the same time period.

BLOOMBERG