EFG Trails Earnings Goal as Net Rises 0.5%; Shares Slide

EFG International AG, the Swiss bank controlled by billionaire Spiro Latsis and his family, said it’s behind in meeting a profit target after earnings rose 0.5 percent last year. The shares fell the most in three months.

Net income increased to 111.8 million Swiss francs ($126 million) from 111.2 million francs a year earlier, the Zurich-based bank said in an e-mailed statement today.

“Private banking is experiencing challenging times, and our results last year were impacted by fragile client sentiment, particularly in the third quarter, and exceptional legal and regulatory expenses,” Chief Executive Officer John Williamson said in the statement. “We are absolutely committed to delivering a step change in growth and profits.”

EFG is targeting annual profit of 200 million francs by 2015. The bank withdrew from about 20 locations since mid-2011 to bolster earnings and sold the remainder of its stake in EFG Financial Products, now known as Leonteq AG, for about 34 million francs to Notenstein Private Bank last April.

The shares fell 8.5 percent, the biggest drop in more than 20 months, to 11.90 francs at the close of trading in Zurich, valuing the company at 1.7 billion francs. The stock has declined 6.7 percent this year, compared with a 4.3 percent advance for the 43-member Bloomberg Europe Banks and Financial Services Index.

‘Weaker Results’

“EFG published weaker 2013 results than expected,” Andreas Venditti, an analyst with Vontobel Holding AG in Zurich, said in e-mailed comments to clients. “The net profit target now depends on net new money at the top end of the target range, as well as market conditions and rising interest rates.”

The company proposed to increase the shareholder dividend to 20 centimes from 10 centimes.

A 15.4 million-franc charge for “a long-standing legal action in the U.K.” hurt full-year profit, the company said. EFG also made a provision of 8 million francs in the first half for its share of an advance payment made by Swiss banks as part of a tax agreement between Switzerland and the U.K.

Revenue-generating assets under management were little changed at 75.9 billion francs, compared with 76 billion francs at the end of June. New inflows were 2.5 billion francs, missing the firm’s target range of 5 percent to 10 percent growth.

EFG said it added 19 bankers in the second half of last year and will continue hiring, including in central and eastern Europe. The firm has increased the amount of managed assets per banker by 12 percent since 2011 and will absorb client advisers from Falcon Private Bank in Hong Kong this year, after an agreement last month.

EFG is one of 106 firms that entered a U.S. Department of Justice voluntary disclosure program for Swiss wealth managers seeking to resolve a dispute between the two countries over untaxed American funds in offshore accounts. The company reported a provision of 6.5 million francs to cover future legal expenses related to the program.

EFG said it wasn’t possible to make a reliable estimate of the final penalty that may be payable as a result of the program.

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