(Bloomberg) - Julius Baer Group Ltd. said the worst of the market selloff may be over for the Swiss wealth manager after a first half that was one of the most difficult in decades.
Clients have started to come back and will probably look for ways to make money again in the second half, Chief Executive Officer Philipp Rickenbacher said in an interview Monday. First-half profit slumped 26% as wild market swings spooked wealthy investors and eroded assets the firm oversees for the rich.
“I think the worst is through, at least for what we have seen,” Rickenbacher said on Bloomberg TV. “While it’s a bit too early to see a full swing re-leverage yet, I think clients will look very closely at opportunities in the second half.”
The results are the first indication how Switzerland’s large wealth managers navigated volatile markets and surging inflation that are weighing on clients’ risk appetite and threatening to drive up bad loans. Julius Baer said in May that it’s stepping up efforts to rein in costs as clients remain on the sidelines, including by streamlining the markets where it operates and using technology.
Julius Baer shares reversed losses to rise 2.1% at 10:44 a.m. in Zurich. They had declined as much as 5% earlier, as operating profit missed analysts’ estimates, costs rose and a hiring freeze suggested the firm remains cautious for now.
Operating costs rose 5.8% in the first half, driven by provisions and losses from a legacy litigation case. But personnel expenses decreased by about 1% as the firm reduced the bonus pool to reflect a weaker business performance.
Assets under management slumped 11% from the end of last year, mainly driven by market swings. While clients pulled 1.1 billion francs over the six months, Julius Baer said inflows have started to come back recently.
Rate Boost
Net income fell because of lower transaction- and trading-driven income. However, net interest income rose as banks across Europe stand to benefit from the end of negative interest rates that have saddled them and their clients with costs to hold excess deposits. Julius Baer said last week it will no longer charge negative interest rates on client deposits in euro, Swiss franc, and Danish krone as of Aug. 1.
Russia’s invasion of Ukraine and the ensuing sanction on some of the country’s wealthiest people is also upending wealth management and private banking plans from Zurich to New York. For Julius Baer, the regulatory risks are particularly acute after the bank came under regulatory fire over a money laundering scandal in Latin America.
The firm said it has initiated the wind-down of its advisory subsidiary in Moscow, in compliance with local regulations and contractual agreements. The net asset value of this entity on 30 June 2022 was CHF 1.2 million.
By Myriam Balezou and Marion Halftermeyer
