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Bernhard Hodler, chief executive officer of Julius Baer Group Ltd. gestures during a presentation for Investors, Analysts and Media in Zurich, Switzerland, on Wednesday, Jan. 31, 2018.

(bloomberg)

(Bloomberg) -- Julius Baer Group Ltd.’s aggressive drive to hire private bankers slowed in 2017, signaling Switzerland’s third-largest wealth manager may struggle to add new assets at the same pace as under former Chief Executive Officer Boris Collardi.

The bank hired about half its planned number of 80 relationship managers last year, while the lender’s assets under management lagged estimates. Margins also remain under pressure, prompting a stock decline of as much as 4.3 percent in Zurich on Thursday. Collardi, who left the Zurich-based lender in December, hired 166 wealth managers in 2016.

Collardi surprise departure stunned the staid Swiss private-banking world and prompted analysts to question whether Julius Baer could sustain its growth rates and aggressive hiring plans. New Chief Executive Officer Bernhard Hodler is seeking to revive recruitment this year -- again with a target of 80 relationship managers -- even as he grapples with cost and margin pressures. Acquisitions could form part of further growth plans after the bank announced the acquisition of a Brazilian wealth manager.

Today’s results, “fail to impress,” Vontobel’s Andreas Venditti wrote in a note to clients. Still, net new money surged, with the bank adding as much cash in the second half as it did in all 2016.

Cash Inflows

Hirings are key as they set the stage for a surge in cash inflows, an indicator of future revenue, as clients often follow their advisers. Related investments continue to weigh on the bank’s cost to income ratio -- one of its key financial metrics -- with the figure remaining above its goal of between 64 percent and 68 percent. That should change this year, Hodler said at a press conference in Zurich on Wednesday.

The bank released a solid set of results, which are broadly in-line with market expectations said Tomasz Grzelak, an analyst at Baader Helvea. Still, he said, “we believe it will be difficult for the bank to sustain,” the strong growth in assets considering that the relationship manager base of Baer increased by only 1 percent in 2017.

Overall, net income on an adjusted basis rose 14 percent to 806 million francs.

Hodler, speaking on Bloomberg Television, said he spent most of his first few weeks on the job communicating with large shareholders and argued that share price gains since then show “everybody has calmed down" since Collardi’s departure. He said he’s not greatly concerned by Collardi taking clients to Pictet & Cie, as the rival wealth manager is “differently positioned." Still, some analysts are seeking more information on the bank’s future plans.

‘More Details’

“Julius Baer has not said much about strategy -- we could have expected perhaps slightly more details there in today’s statement," Daniel Regli, an analyst at MainFirst Bank AG in Zurich, said by phone.

Hodler said he sees strong growth potential Latin America, adding that acquisitions are one way to grow. The bank on Wednesday said it agreed to acquire 95 percent of Sao Paulo-based Reliance Group for an undisclosed amount. Since 2012, the bank has also acquired the international operations of Bank of America Merrill Lynch and the European operations of Bank Leumi Le-Israel BM.

Hodler says he’s confident that Julius Baer won’t itself be acquired and that the “best defence is a high stock price."

‘Normalised Pace’

The bank said the hiring focus shifted in 2017 towards a more “normal" pace after 2016’s growth. Overall the number of relationship managers rose to 1,396. Assets under management for each relationship manager rose by 14 percent. Net new money was helped by inflows from Asian, Middle Eastern clients and a recovery in Latin America with a “continued healthy net new money development in the traditional European markets."

It has also bought the Luxembourg arm of Commerzbank AG and expanded its majority stake in Milan-based asset manager Kairos Investment Management SpA, which it may keep after initial plans for a listing, according to people familiar with the deliberations.

Julius Baer will pay a dividend for the year of 1.40 francs per share, a 17 percent rise compared to the previous-year period.

To contact the reporters on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net, Patrick Winters in Zurich at pwinters3@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Keith Campbell

©2018 Bloomberg L.P.

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