July 23, 2018 / 12:20 PM / a month ago

Julius Baer shares drop as clients get more cautious

ZURICH (Reuters) - Julius Baer’s (BAER.S) warning that its customers were becoming more cautious and a slowdown in first-half net new money inflows contributed to sharp drop in the Swiss bank’s shares on Monday, making them the weakest performers in Europe’s bank index.

FILE PHOTO: The logo of Swiss private bank Julius Baer is pictured on the company's branch in Lausanne, Switzerland, November 13, 2014. REUTERS/Denis Balibouse/File Photo

Shares in Switzerland’s third largest listed bank fell 4 percent after it reported net new money of 10 billion Swiss francs in the first half, less than the 11.9 billion francs and 10.2 billion francs it took in during the two previous half-year periods.

Customers selling credit-financed portfolios were responsible for the decline, Chief Executive Bernhard Hodler said.

“Some clients have deleveraged their portfolios,” he told reporters. “Geopolitical tensions are impacting our clients and they are positioning themselves more cautiously.

“What we see is more interaction with the clients ... you can imagine the volatility this year. But overall they are still invested and they don’t want to miss opportunities.”

Julius Baer also highlighted the European Central Bank’s plans to end its ultra easy monetary policy as well as trade war tensions as factors behind the increasing caution.

But Hodler, who took over from long-time boss Boris Collardi following his departure for independent wealth manager Pictet in November, said he thought the sale by clients of debt financed portfolios was “more or less at an end.”

The bank also kept its target of attracting net new money in the range of four to six percent, after a 5.1 percent growth rate during the first half of 2018.

Its adjusted net profit increased rose 19 percent to 480 million Swiss francs ($484.41 million), matching forecasts in a Reuters poll of analysts.

But total operating income of 1.79 billion francs and overall assets under management of 399.9 million francs both slightly missed forecasts.

“While the bank slightly disappointed on the top-line figures, adjusted net profit met the expectations thanks to effective cost control,” said Thomasz Grzelak, an analyst at Baader Helvea, who highlighted a slowdown in net new asset growth.

“We believe the outlook is somewhat cautious, pointing to a more difficult environment towards the end of the first half.”

Private banks such as Julius Baer often sign up more customers when they hire new advisers who often bring their clients with them.

The bank increased added 79 new advisers since the start of the year, including 13 from Reliance Group, a Brazilian wealth manager that Baer bought in January.

Hodler said the bank would increase the number of advisers, and was optimistic it would achieve or even exceed its target to add 80 new advisers, not including those from Reliance, this year.

He said the bank had other medium or small acquisition targets that it could buy without having to raise funds.

Hodler also did not rule out large acquisitions, adding that there would be more opportunities for takeovers in the coming months.

Reporting by John Revill, additional reporting by Angelika Gruber. Editing by Jane Merriman

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