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Julius Baer Sees Private Banking Assets Stagnate, Baer Family Lose Out

Contributing Editor

9 March 2005

Julius Baer saw no increase in its private banking assets under management in 2004, despite a 17 per cent increase in institutional assets under management, according to its annual results for 2004. The bank also made a series of senior management changes which saw members of the Baer family depart the bank. Baer said in a statement: “In private banking, the growth of assets under management was hampered by the sluggish market environment, the resulting client reticence, the lack of notable net new money inflows, and the occurrence of negative currency effects.” Baer said money outflows exceeded net inflows by SFr800 million ($687.9 million). Consequently, assets under management remained nearly unchanged from the previous year at SFr61 billion. But net profits within the private banking unit rose by 16 per cent to SFr89 million—largely due to cost cutting. The bank’s institutional asset management business fared much better, with managed assets rising by 17 per cent to SFr135 billion. Net new money here rose by SFr17 billion. Baer said the good performance was attributed to the success of its institutional mandates and investment fund business in the US. The Julius Baer board can be happy that costs have been kept under control. Overall costs were cut by 4 per cent. This was largely due to a 6 per cent fall in personnel expenses, which were helped by an 11 per cent decrease in the average number of employees from 2020 to 1802. This helped the group’s overall net profit to climb to SFr222 million in 2004, compared with SFr82 million in 2003, although the latter figure included one-time special charges of SFr 113 million. The overall numbers have brought some cheer in the house of Baer. Raymond Baer, chairman of the bank said in a statement: “The good business performance in 2004 validates our strategic focus on asset management for private and institutional clients as well as on trading.” He added: “We find ourselves in a very promising position, which we will be able to capitalize on more thoroughly and swiftly thanks to the greater entrepreneurial flexibility we will create through unification of the capital structure.” The bank felt generous enough to give its shareholders a SFr8 dividend, representing an increase of SFr2, or 33 per cent per share. It also announced another share repurchase programme, although no details were given on this. The bank is moving to a single share structure at its annual general meeting to be held on April 12. “The resulting equal voting rights per share mean that Julius Baer is opening itself completely to the public and the capital market. This will open up new opportunities for the Julius Baer Group to achieve the growth needed in the future,” said Raymond Baer. Baer also said the bank is not about to sell to any would-be acquirer, despite the persistent rumours. “Julius Baer is not a takeover candidate. Quite the contrary is true: apart from organic growth, we can envision engaging in value-enhancing acquisitions. The keys to independence are sustained profitable growth and a high stock market valuation,” Raymond Baer said in the statement accompanying the annual results. The family Baer—which according to many observes of the bank is split between two factions on how to run one of Switzerland’s most well known private banks—look to be taking more of a back seat in running the bank. The annual results reported that Rudolf Baer, Marc Baer and Andreas Baer will resign from the board in April. The move is designed to correspond with the change in the share structure of the bank and represents the dwindling influence the Baer family have on running the Zurich-based bank.