Vontobel Investment Outlook Mars Swiss Bank’s Earnings Beat

  • CEO Zeno Staub expects clients to remain cautious in 2017
  • Says Trump election has prompted emerging-market redemptions

Vontobel Holding AG sees generating investment returns for clients as challenging this year, with a shift out of the Swiss bank’s emerging-market funds overshadowing its 2016 result and dividend increase.

“Many of our clients will remain cautious,” Chief Executive Officer Zeno Staub said in an earnings statement on Wednesday. “The first few weeks of 2017 are an indication that this will not be an easy year. Political developments, the shift from quality to value, and rising U.S. interest rates –- and the subsequent impact on emerging markets -– will continue to pose challenges for our business.”

Staub’s comments, accompanied by a warning of “headwinds” for some of the firm’s investment strategies and a “flattening of profit growth” in 2017, quelled enthusiasm for the Zurich-based company’s positive operating result. Vontobel shares slipped 2.6 percent to 54.85 francs as of 1:30 p.m. in Zurich, trimming their advance this year to 2.6 percent.

Net income advanced to 264 million Swiss francs ($264 million) from 180 million francs a year earlier, Vontobel said in the statement. The result, which includes a 91 million-franc gain from a sale of a stake in Swiss insurer Helvetia Holding AG, beat an average estimate of 256.1 million francs by 10 analysts published on Vontobel’s website.

Vontobel proposed to increase the shareholder dividend 8 percent to 2 francs a share, including a special payout of 0.10 francs, according to the statement.

“It’s a small beat, but they needed to come out with a big positive surprise for traders to buy into a relatively expensive stock today,” said Tomasz Grzelak, a Zurich-based analyst with Baader Helvea. “The outlook is poor for the asset-management unit and investors won’t like the continuing fund outflows.”

Vontobel, which has private wealth, institutional asset-management and financial-products businesses, expanded by acquiring Vescore Ltd. last year and Twentyfour Asset Management LLP in 2015 and is focusing on asset management to drive growth. The firm, majority owned by a shareholder pool including relatives of the bank’s founder, has said it could raise 350 million francs to 400 million francs for additional deals.

Investors are looking “to glean any clues on whether Vontobel is closer to deploying its powder” for further deals, Citigroup Inc. analysts including Nicholas Herman and Andrew Coombs wrote in a note to clients on Jan. 27. The company remains open to acquiring wealth and asset managers, Staub told reporters on Wednesday.

While wealth-management clients added new money of 2.2 billion francs in 2016, exceeding the firm’s target, clients pulled 15.7 billion francs from Vontobel’s U.S.-based Quality Growth asset-management business -- mostly in the first half -- after star fund manager Rajiv Jain quit the business he helped to build.

The unit suffered more outflows in the fourth quarter as investors turned to the U.S. and developed markets amid the ascent of Donald Trump, prompting them to redeem money from Vontobel’s emerging-market strategies.

‘Hard Time’

“If Mr. Trump really starts to hammer emerging markets, everybody who is in emerging-market products will have a hard time,” Staub said at an earnings presentation in Zurich.

It’s not the first time the firm has had to deal with investors shifting their preference toward developed markets, according to Staub. Vontobel turned down almost 10 billion francs of business in “the heyday of emerging markets” in 2014, he said.

“We’ve been quite strict in vetting our clients to our investment approach,” the CEO said in an interview following the presentation. “We’ve turned down business when we’ve had significant doubts that people would be willing to live with us through the cycle.”

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