Julius Baer’s New Strategy Update Fails to Impress Investors

(Bloomberg) — Julius Baer Group Ltd. unveiled fresh targets aimed at cutting costs and setting the Swiss wealth manager on the road to better profitability, though investors saw little reason to cheer. 

Shares in the Zurich-based lender fell after the open on Tuesday, following Chief Executive Officer Stefan Bollinger’s announcement of an extra 130 million Swiss francs ($159 million) in cost cuts through 2028. The bank set a weaker efficiency target, as well as a moderate goal for new client funds.

Bollinger and new Chairman Noel Quinn are seeking to put the bank on a path for growth after a string of missteps including the 2023 losses linked to the Signa real estate collapse. Yet both of Bollinger’s strategy announcements since taking over in January have left investors looking for more.

Baer shares were down 1.3% at 10:52 a.m. in Zurich. 

The firm scrapped medium-term targets for profitability, and instead re-introduced a goal for net new money, a key metric for wealth managers. Julius Baer acknowledged that growth in new money had been “sluggish” since 2022, averaging just 2.7% a year.

The firm is now aiming to notch at least 4% growth in that measure by 2028, and hire some 150 relationship managers per year through the period.

“We’re looking for high quality, sustainable growth and not any kind of net new money,” Bollinger said in a call with journalists. “These targets are realistic targets.”

On growth, the bank said it intends to “sharpen segmentation and coverage, enhance its product offering, strengthen top positions in core geographies, and increase productivity.”

Buybacks Frozen

“Baer has reported an underwhelming strategy update as net new money and cost income ratio targets fail to excite relative to expectations,” analysts including Tom Hallett at KBW wrote in a note. 

In May the bank booked another large loss from property developments it helped finance. The 130 million Swiss francs loan-loss charge related to its private debt business and selected positions in its mortgage operation.

In the same month Julius Baer disclosed that regulators had ordered it to hand over 4.4 million Swiss francs because of alleged failings in money-laundering controls related to transactions that had occurred between 2009 and 2019. 

Baer confirmed that a share buyback program is on hold until it has clarity over the outcome of an investigation into the Benko losses by the regulator Finma has concluded. 

Anke Reingen, an analyst at RBC Capital Markets, said that the target updates “make sense” but that investors would need to see “evidence of a better outcome and buybacks to resume to see earnings growth and upgrades coming through.”

 

–With assistance from Jan-Henrik Förster, Macarena Muñoz and Levin Stamm.

(Updates with further details throughout)

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