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Lombard Odier Posts Profit in First Report Since 1796

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Cie. Lombard, Odier SCA Senior Managing Partner Patrick Odier
Patrick Odier, Senior Managing Partner of Cie. Lombard, Odier SCA. Photographer: Simon Dawson/Bloomberg

Aug. 28 (Bloomberg) -- Cie. Lombard, Odier SCA, Geneva’s oldest bank, said net income was 62.5 million Swiss francs ($68 million) in the first half as it reported earnings for the first time in its 218-year history.

Lombard Odier followed Pictet & Cie. Group SCA, Geneva’s biggest bank, which earlier this week unveiled its first financial statement since it was established in 1805. Both banks dropped their centuries-old partnership structures in January. New corporate partnership arrangements came with the requirement to report publicly.

The disclosures come amid declining profit at some Swiss banks and a Justice Department probe into tax evasion by U.S. citizens. Companies are seeking to adapt by widening their client base and offering customers new investment services.

“Our group is increasingly diversified, more international and more balanced between private and asset management clients and we are expanding our partnerships with financial services providers,” Senior Managing Partner Patrick Odier, 59, said in the statement today. “Our solid net profit allows us to continue investing in all three businesses.”

Lombard Odier’s cost-to-income ratio, a measure of profitability, was 80 percent for the period, as it invested in its private and institutional client businesses. It didn’t provide any details of year-ago figures in the earnings report.

The bank said it managed 156 billion francs for clients at the end of June and total client assets, including those held in custody only, were 211 billion francs.

Tax Program

Lombard Odier entered the Justice Department’s voluntary tax disclosure program in December. While the bank has set aside provisions to pay a possible fine, it hasn’t disclosed the amount, said managing partner Hugo Baenziger, a former chief risk officer at Deutsche Bank AG who joined in April.

“The moment we publish the number we provide for, that’s the number we have to pay,” Baenziger told reporters on a conference call.

While Switzerland remains the largest hub for cross-border banking, with $2.3 trillion of assets, more than a third of its private banks were loss-making last year as companies set aside about 900 million francs for costs related to the U.S. investigation, accounting and advisory firm KPMG said in a report on Aug. 20.

Lombard Odier is run by eight managing partners, including Thierry Lombard, who has worked at the bank since 1976, and Frederic Rochat. It employs about 2,000 people in 19 countries or jurisdictions.

Client Assets

Total assets of private clients were 114.7 billion francs, while institutional customers invested 47.8 billion francs, Lombard Odier said. Assets of clients using its custody and technology services amounted to 48.5 billion francs.

Lombard Odier recorded “slightly negative” net new money in the first half of the year after low interest rates prompted institutional clients to withdraw from its money market funds, Rochat said. Investments pulled from the asset management business outweighed positive net new money from private clients, he said.

Lombard Odier has hired fund managers such as New York-based Steven Bulko, formerly of Dillon Read Capital Management LLC and Goldman Sachs Group Inc. to boost business from institutional clients such as pension funds.

Bulko’s 1798 Fundamental Strategies Fund, which oversees $1.35 billion, gained more than 26 percent since he began running it in 2011, the bank said. The fund has declined almost one percent this year. Nathalia Barazal, based in London, manages $7 billion in convertible-bond funds, it said.

Mirabaud SCA, a Geneva bank founded in 1819, reported 17.5 million francs net income in the first six months of the year from client assets of 27 billion francs. The company, which also changed its partnership structure, isn’t among those seeking a non-prosecution agreement in the U.S. tax program, it said in an e-mailed response to questions.

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

To contact the editors responsible for this story: Mark Bentley at mbentley3@bloomberg.net Simone Meier

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