Julius Baer Says Market Volatility Widened Margins This Year

Updated on

Julius Baer Group Ltd., Switzerland’s third-biggest wealth manager, said volatility in financial markets prompted customers to trade more actively, increasing revenue from managing their money.

The gross margin, or revenue compared with client assets, was “exceptionally high” in January, when the central bank ended a cap on the Swiss franc’s value against the dollar, the company said on Tuesday. The margin exceeded 100 basis points in the first four months compared with 94 basis points in 2014.

Julius Baer, the subject of takeover speculation among investors, has grown its client asset base by purchasing assets such as Merrill Lynch’s wealth units from Bank of America Corp. It is expanding its international private banking network as operations in Switzerland become more expensive due to legal and regulatory costs and the strong currency.

“The boost in client engagement was driven by higher market volatility and was evident in many areas,” Julius Baer said in a statement from Zurich. It also cited increased volumes in structured products and transactions in equities and fixed income.

The franc’s strength brought a 1 percent decline in managed assets to 289 billion francs ($310 billion) in the first four months. The impact of the currency movements was 19 billion francs in the period, Julius Baer said.

Shares Climb

The shares rose 1.1 percent to 50.55 francs at 10:45 a.m. in Zurich trading, valuing the company at 11.3 billion francs. They rose 11 percent this year, lagging an advance of 17 percent for the Bloomberg Europe 500 Banks & Financial Services Index.

“While the gross margin is a striking figure, things have calmed down a lot since January,” said Tim Dawson, a Geneva-based analyst with Baader-Helvea. “Given the negative impact of the strong franc, the small decline in assets under management is a sustainable positive surprise.”

The transfer of 4.3 billion francs from the merger of Israeli-owned Leumi Private Bank AG in March also helped bolster total assets, Julius Baer said.

Net new money was at the lower end of a 4 to 6 percent target range, the company said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE