Zurich, 23 May 2024 – In the first four months of 2024, Julius Baer’s operating performance benefitted from substantial growth in assets under management (AuM) as well as from a marked recovery in client activity from the multi-year low levels experienced in the second half of 2023 (H2 2023). After a weaker start in January, net inflows improved significantly in the following three months. The sizeable increase in client assets and improving gross margin drove profitability up meaningfully compared to H2 2023, outpacing further growth investments. The Group’s CET1 capital ratio improved to 15.3% at the end of April 2024, underlining the strong capital-generating nature of the Group’s business model.
AuM grew by 10% to CHF 471 billion
In the first four months of 2024, AuM rose to CHF 471 billion, a year-to-date increase of 10%. The increase was driven by a significant positive currency impact and by strong stock markets, only partly offset by a decline in bond market valuations.
After a negative start in January, net new money** recovered meaningfully to a 3% annualised pace over the subsequent three months, resulting in total net inflows of CHF 1 billion by the end of April. While relationship managers who joined Julius Baer in 2023 again contributed positively to net inflows, the overall result was impacted by ongoing client deleveraging.
AuM included CHF 4.8 billion from Kairos, the sale of which was completed after 30 April 2024. Kairos was deconsolidated as per 2 May 2024.
Gross margin close to 89 basis points
Driven mainly by a clear recovery in the activity-driven revenue components, the gross margin for the first four months of 2024 rose to close to 89 basis points (bp), a significant improvement from the 82 bp underlying*** gross margin in H2 2023. This increase was driven by higher gross margin contributions from net income from financial instruments measured at FVTPL**** (including a small improvement in treasury swap income) as well as from net commission and fee income (including an improvement in the recurring fee margin), partly offset by a lower gross margin contribution from net interest income. There were no net credit losses in the first four months of 2024.
Cost/income ratio just over 69%, pre-tax margin 27 bp
Despite further investments in growth, including the onboarding of an additional 35 (net) new relationship managers, the strong increase in AuM and the improving gross margin drove the adjusted cost/income ratio down to just over 69%, an improvement from the 73% underlying cost/income ratio in H2 2023. For the same reasons, the adjusted pre-tax margin increased to 27 bp, up from 22 bp (underlying) in H2 2023.
Strongly capitalised
The Group’s CET1 capital ratio strengthened to 15.3% (end 2023: 14.6%) and the total capital ratio rose to 24.9% (end 2023: 24.0%). The effect of improved profitability was reinforced by the further benefit of the ‘pull-to-par’ reversal of the decline (back in 2022) in the value of bonds held in the Group’s treasury portfolio (financial assets measured at FVOCI*****), as well as a reduction by CHF 0.1 billion in the private debt loan book to CHF 0.7 billion (at 100% credit risk weighting).
At these levels, the Group’s CET1 and total capital ratios remain well above the Group’s own floors of 11% and 15% respectively, and significantly in excess of the regulatory requirements of 8.3% and 12.5% respectively.
The Group’s tier 1 leverage ratio stood at 4.9% (end 2023: 4.9%), substantially above the regulatory requirement of 3.0%.
* Based on unaudited management accounts. This media release contains certain financial measures that are not defined or specified by IFRS, the definitions of which are provided in the Alternative Performance Measures document available at www.juliusbaer.com/APM.
** Net new money does not include interest and dividend income, in accordance with the Guidelines of FINMA governing financial statement reporting. For a full definition please refer to the Alternative Performance Measures document.
*** Underlying: Excluding in H2 2023 the CHF 586 million increase in loan loss allowances against the single largest exposure in private debt
**** Fair value through profit or loss
***** Fair value through other comprehensive income
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