Julius Baer Gross Margin Narrows; New Money Misses Target

  • Client activity restrained after summer market volatility
  • French, Italian tax compliance slows new money inflows

Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, said its gross margin narrowed as of the end of October after a volatile market in the summer restrained client activity. The stock fell.

Gross margin for the first 10 months of the year was 95 basis points, below the 99 basis points reported for the first half, the Zurich-based company said in a statement on Tuesday. Net client inflows missed the firm’s 4 percent to 6 percent medium-term annualized growth target, Julius Baer said.

“This statement isn’t particularly inspiring, with some new negative trends such as the slowdown in net new money,” said Andreas Venditti, a Zurich-based analyst at Vontobel Holding AG. “The gross margin worsened significantly after an exceptional first half.”

Julius Baer slid 3.2 percent to 45.98 Swiss francs, as of 9:05 a.m. in Zurich, compared with a 0.1 percent advance in the Stoxx Europe 600 Banks Index of 46 financial shares.

The wealthy individuals and families who bank with Julius Baer reduced their trading in September and October after events in China in the first part of the summer prompted an emerging-market rout that rippled across markets globally. Julius Baer also reported lower foreign-exchange trading volumes for September and October.

New Money

While assets under management climbed 4.6 percent to 297 billion Swiss francs ($296 billion) at the end of October from the end of the first half, net new money growth was damped by French and Italian clients taking steps to comply with tax rules in their home countries, Julius Baer said. Net new money from eastern Europe and Latin America also slowed, the bank said.

Julius Baer’s investors are wondering how the bank will deploy capital after it resolves a dispute with the U.S. government over its role in helping Americans hide untaxed assets in Switzerland. Julius Baer set aside $350 million for a potential U.S. penalty in the second quarter and gave no new information on the matter on Tuesday. The company said in July it will discuss its capital-management policy once the U.S. issue is resolved.

The manager has made a clutch of small purchases since it bought Bank of America Corp.’s non-U.S. Merrill Lynch wealth business three years ago. Julius Baer announced last week it acquired Swiss asset manager Fransad Gestion SA, which oversees about 1.3 billion francs. The final piece of the Merrill Lynch deal, a business in India, was transferred in September, adding about 6 billion francs of client assets.

Chief Executive Officer Boris Collardi would consider more deals in Switzerland or abroad, including those of a “big elephant” size, he told Bloomberg News in a television interview from Singapore on Friday.

Julius Baer said on Tuesday it’s negotiating to increase its 19.9 percent stake in Italian asset manager Kairos Investment Management SpA and is considering subsequently selling a minority of the company on the Italian stock exchange.

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