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Julius Baer's AuM Rises In Q3; Warns Of Kairos Impairment

Tom Burroughes, Group Editor , 20 October 2020

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The Zurich-listed bank, which operates in a number of regions, presented a mixed set of figures for the first nine months of this year and Q3. Its majority stake in Italian investment house Kairos, from which there have been outflows, has led it to warn that there will be a goodwill impairment charge.

Julius Baer yesterday said that its results for 2020 will be hit by the goodwill impairments it has sustained following its purchase of Italian asset and wealth management company Kairos Investment Management.

The Zurich-listed bank, which has a majority cent stake in Kairos, said outflows of money from the Italian firm have declined over the past months, resulting in AuM of SFr5 billion ($5.48 billion) at the end of September 2020. Julius Baer said further impairment of goodwill on its investment in the firm will cause a non-cash charge of about SFr190 million on the bank’s 2020 IFRS financial results.

“A select number of key investment managers of Kairos will become minority shareholders, with Julius Baer retaining 70 per cent ownership. Under the leadership of a new soon-to-be-appointed CEO, the team will further develop and implement the revised business plan. With these steps, a solid foundation has now been put in place for Kairos’ renewed and sustainable long-term success,” it said. 

In other news, the bank said that the gross margin on Julius Baer’s business has narrowed. The margin had been widened by market volatility and heightened trading volumes in the earlier parts of the year. For the first nine months of 2020, that margin was just over 89 per cent basis points, narrowing from 92 bps in the first half of this year and 82 bps for the whole of 2019.

Assets under management stood at SFr413 billion at the end of September 2020, rising by 3 per cent since the end of June 2020, as the stock market recovery that started in March 2020 continued into the third quarter of 2020. Since the end of 2019, however, AuM has slipped by 3 per cent. Net new money inflows rose in the third quarter of 2020, resulting in an annualised growth rate of close to 4 per cent for the first nine months of 2020 (compared with 2.3 per cent for the first half of 2020 and 2.8 per cent for the full year 2019).

Cost cuts have improved the cost/income ratio, Julius Baer said. The adjusted cost/income ratio for the first nine months of 2020 stood at 66.1 per cent, falling 66.6 per cent in the first half of 2020 and 71.1 per cent for the full year of 2019.

At the end of September 2020, Julius Baer’s BIS CET1 capital ratio - an international measure of a bank’s capital buffer - stood at 14.3 per cent (up from 13.9 per cent at the end of June 2020 and 14.0 per cent at the end of 2019). 

Subject to shareholder approval at a 2 November meeting, Julius Baer will make its second distribution to shareholders of SFr0.75 per share. The bank, heeding requests by Swiss state regulator FINMA, is splitting its dividend payments to smooth the impact on its balance sheet. The first distribution of SFr0.75 per share was made on 25 May 2020.

At the end of September 2020, Julius Baer completed the sale of its Bahamas operations to Ansbacher (Bahamas), a local wealth management company. Financial terms were not disclosed.

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