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Vontobel Says Full-Year Profit Slips on One-Time Charges

Feb. 7 (Bloomberg) -- Vontobel Holding AG, the Swiss bank and brokerage that specializes in derivatives, reported an unexpected drop in full-year profit after one-time charges at its private bank and a slowdown in client inflows.

Net income fell 1.5 percent to 122.3 million Swiss francs ($136 million), missing an average estimate of 139 million francs by six analysts surveyed by Bloomberg. One-time costs were 20.7 million francs, the Zurich-based company said in an e-mailed statement today.

The company reported net inflows slowing to about 900 million francs in the second half of the year from 8.2 billion francs in the first six months. It reiterated it would follow a “consistent” dividend policy, while keeping capital for acquisitions.

“Net inflows in the second half of the year were worse than expected,” said Eleni Papoula, an analyst with Berenberg Bank in London. “It’s also disappointing they kept a constant dividend pay-out ratio and policy.”

Vontobel dropped as much as 4.2 percent and fell 2.7 percent to 33.7 francs at 11:15 a.m. in Zurich, extending this year’s slump to 8.4 percent. That compares with a 2.3 percent advance for the 43-member Bloomberg Europe Banks and Financial Services Index in the period.

Vontobel, majority owned by a shareholder pool including the founding family with the same name, generates revenue from investment banking, institutional asset management and private banking.

Dividend Increase

The bank said it plans to increase its shareholder dividend to 1.30 francs from 1.2 francs last year, matching a forecast of analysts surveyed by Bloomberg,

Vontobel said its one-time costs in private banking comprise a 15.4 million franc “realignment” of its cross-border business, a 3.2 million franc payment related to a U.K.- Swiss tax agreement and a charge of 2.1 million francs for participating in a Department of Justice disclosure program in a category for banks that haven’t violated U.S. law.

Vontobel said in December that it doesn’t expect to pay a penalty as a result of a U.S. crackdown on undeclared offshore assets that’s prompted more than 100 other banks to enter the program seeking a non-prosecution agreement from the Justice Department. Vontobel told its American private clients in 2008 to either join its Securities and Exchange Commission-registered unit or leave.

Investment Banking

While private banking and asset management boosted pretax profit, earnings from investment banking declined 18 percent, amid “subdued demand” for structured products, Vontobel said in the statement. The firm is trying to attract more banks to use its online products service known as deritrade, after Societe Generale SA, Morgan Stanley and Deutsche Bank AG started using the platform.

“Vontobel has limited flexibility in managing the short-term cost base in investment banking,” said Tim Dawson, a Geneva-based analyst with Helvea. “It’s very sensitive to trends in client activity levels.”

The bank had a “good start” to 2014 and is striking the right balance between implementing growth initiatives and exercising cost discipline, Chief Executive Officer Zeno Staub told reporters on a conference call. The cost-to-income ratio, a measure of profitability, worsened to 81 percent, including the one-time charges, compared with a goal of less than 75 percent.

Acquisition Plans

Staub has been searching for acquisitions for at least 2 1/2 years as the bank targets total client assets, including those held in custody and invested in structured products, of 175 billion francs this year. The assets totaled 163.1 billion francs as of Dec. 31. Managed client assets were 109.6 billion francs at the end of December, compared with 108.1 billion francs six months earlier.

Vontobel is keeping about 500 million francs to 600 million francs for potential acquisitions, Chief Financial Officer Martin Sieg Castagnola said on the call. The bank has said it could absorb private-banking or asset-management businesses.

Focusing on the recruitment of private banking advisers, rather than purchases, could enable Vontobel to increase its shareholder payouts more quickly, which would appeal to investors, Dawson said.

Vontobel said today it restated results for 2012 in line with revised accounting standards. The firm previously reported net income of 130.6 million francs for 2012.

To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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