Gains in markets and net inflows buoyed AuM to some extent although the fall in the dollar exchange rate against the Swiss franc took the shine off the figures.
Julius Baetr said yesterday that its assets under management rose 1 per cent from the start of 2023 to stand at SFr429 billion ($475.9 billion) at the end of April, driven by positive market performance and net new money inflows. There was some negative impact as the Swiss franc appreciated against the dollar – a trend that accelerated in April.
The Zurich-listed bank which, once UBS fully takes over Credit Suisse, will be the second-largest Swiss lender, said that net new money “went off to a slow start at the beginning of 2023.” It was affected by clients having reduced their leverage, although not as much as at the start of last year. However, net inflows rose more recently, equating to SFr3.5 billion in net new money by the end of April, or SFr5.2 billion if the effect of deleveraging was accounted for. There were “solid contributions” from clients domiciled in Asia (especially Hong Kong), Europe (especially the UK and Ireland and Switzerland), the Middle East, and Israel, it said.
The global banking sector has been hit by the failures and rescues of Silicon Valley Bank, Signature Bank and First Republic in the US, and the share price collapse of Credit Suisse and its subsequent rescue by UBS at the behest of the Swiss federal government. That transaction has upended the Swiss banking marketplace, potentially causing banks' clients to review where they put their money.
“The first four months of 2023 provided a challenging backdrop for wealth managers, with uncertainties in particular areas of the banking sector towards the end of the period, highlighting the importance of Julius Baer’s outstanding financial strength,” Julius Baer said in its results update yesterday. “Over the period, the group’s capital position and balance sheet liquidity were further reinforced from the already solid levels reported at the end of 2022.”
Julius Baer said it had a gross margin for the first four months of 2023 of just over 92 basis points (bp), slightly below the close to 93 bp achieved in the second half of 2022, but running well above the 87 bp attained in full year 2022. (The term refers to a profitability measure that looks at a company's gross profit compared with its revenue or sales.) The bank did not give a specific financial figure for profit in its statement.
Compared with the second half of 2022, the rise in the gross margin contribution from net commission and fee income, on the back of somewhat higher client transaction activity, was balanced by slightly lower contributions from net interest income as well as net income from financial instruments measured at FVTPL [Fair value through profit or loss], which was affected by a decline in market volatility.
Following the further interest rate hikes since the beginning of the year, the overall gross margin contribution from the revenue components directly sensitive to interest rates grew modestly.
The lender said its adjusted cost/income ratio was just over 66 per cent, largely unchanged from the 2022 financial year.