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Vontobel Climbs as Profits Surprise After Client Inflows

Vontobel Holding AG, a Swiss bank and brokerage specializing in derivatives, surged in Zurich trading after first-half profit beat expectations and clients added new funds.

Net income declined 15 percent to 66.6 million Swiss francs ($68.1 million) from 78 million francs a year earlier, the Zurich-based bank said today in a statement. That compares with the 45.3 million-franc median estimate of four analysts surveyed by Bloomberg.

The shares jumped as much as 9.7 percent for the biggest gain in more than three years and were up 8.7 percent to 20.10 francs as of 9:52 a.m. in Zurich, valuing the company at 1.31 billion francs.

“It was a pretty good performance given the ugly market environment, and they’ve got costs reasonably under control,” said Tim Dawson, an analyst at Helvea SA in Geneva, who has a neutral rating on the stock. “The standout is the asset-management unit.”

Pretax profit in the asset-management unit almost doubled to 34.7 million francs even as “difficult markets” impeded earnings across the firm. The private-banking business had a “very subdued performance” and pretax profit from investment banking slumped 42 percent to 44.3 million francs on declining trading volumes, Vontobel said.

Net Inflows

Vontobel reported net inflows of 5.3 billion francs compared with 3.4 billion francs in the same period a year ago. That helped boost client assets under management by 10 percent to 90.5 billion francs from the end of December. The gain in client assets enabled the firm to maintain the same level of commission income as for the first half of 2011, according to the statement.

The cost-to-income ratio, a measure of profitability, worsened to 79.3 percent compared with 78.3 percent a year earlier. Vontobel “must implement a lean cost structure,” the firm said in a letter to shareholders published in its financial report. While the company said it reduced expenses 5 percent compared with the first six month of 2011, headcount was little changed at 1,411.

“We’re expecting a challenging environment in the coming months,” Chief Executive Officer Zeno Staub told reporters on a conference call today, adding that political uncertainty around the euro region’s debt crisis was discouraging clients from investing. “We’re approaching these challenges with a clear focus and growth strategy.”

The firm is targeting 175 billion francs of total client assets, including those held in custody, by 2014, compared with 139.4 billion francs reported today.

Staub reiterated Vontobel is seeking acquisitions in private banking or asset management and has about 600 million francs of capital to finance a transaction.

The bank, majority-owned by a shareholder pool including the founding family, said July 13 it has offered to buy BB Biotech AG, an investment company that focuses on drugmakers, for about 1.4 billion francs.

“We’re leaving it now to the constructive dialogue of BB Biotech’s investors to make up their mind,” Staub said today, declining to say whether the shareholders were given a deadline.

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