Vontobel Profit Increases on Asset-Management Unit Earnings

  • CEO says conditions remain challenging with volatile markets
  • Investors pull $12 billion after star fund manager leaves

Vontobel Holding AG said first-half profit increased after earnings climbed at the Swiss bank’s asset-management unit.

Net income rose to 103.3 million Swiss francs ($105 million) from 97.4 million francs a year earlier, the Zurich-based company said in a statement Tuesday. Client assets declined to 179.3 billion francs from 187.2 billion francs at the end of last year after outflows of institutional client money linked to the departure of star fund manager Rajiv Jain in May.

“Profits held up well so far this year, beating consensus” said Jonas Floriani, a London-based analyst with Keefe, Bruyette & Woods. “Money outflows and weaker margins in asset management may have negative effects in the second half.”

Vontobel, which has investment banking, private wealth and institutional asset management operations, said in April that first-quarter profit weakened on lower client activity and trading volumes. Pretax profit at the asset management business nonetheless rose 26 percent to 85.3 million francs over the six months.

Stock Rises

Vontobel climbed as much as 5.6 percent, the most in more than five months, and was up 4 percent to 45.75 francs as of 11:38 a.m. in Zurich. The Bloomberg Banks and Financial Services Index fell 0.5 percent.

The first half net income represents a 19 percent beat, mostly due to lower costs and one-time items, according to a research note by Citigroup Inc.

Market conditions are expected to remain challenging for banking and asset management, Chief Executive Officer Zeno Staub said on a call with reporters. A “short-term increase” of trading in the days following the U.K.’s June 23 vote to exit the European Union had a limited positive effect on revenue in the first half, Staub said.

Jain’s resignation prompted some clients to exercise their rights to redeem assets in the event of change in management, Staub said. Investors pulled 11.8 billion francs from Vontobel’s U.S.-based Quality Growth asset management business in the first half. Staub declined to speculate on future potential outflows.

The company booked a 5 million-franc gain due to the release of deferred compensation after Jain’s departure, Chief Financial Officer Martin Sieg said on the call.

Vontobel expanded its asset management business through the acquisition of Vescore Ltd. last month and Twentyfour Asset Management LLP last year. The firm remains interested in potential purchases and if needed could raise 350 million francs to 400 million francs of capital for them, Sieg said.

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