Presentation of the 2024 half-year results for the Julius Baer Group

Assets under management (AuM) of CHF 474 billion, up 11% from the end of 2023, driven by rising stock markets, a weaker Swiss franc, and net new money of CHF 3.7 billion.
Operating income down by 4% year on year, with higher recurring income and higher levels of client activity more than offset by rise in interest expense. Gross margin of 85 basis points (bp), versus 93 bp in H1 2023.
Lower provisions and acceleration of cost programme offset cost impacts of continued investments in future growth.
IFRS net profit of CHF 452 million, down 15% compared to H1 2023, with IFRS earnings per share (EPS) of CHF 2.20, reflecting year-on-year decline in revenues.
Solid capitalisation, with increased CET1 capital ratio of 16.3% (end-2023: 14.6%), total capital ratio of 26.3% (end-2023: 24.0%) and leverage ratio of 5.0% (end-2023: 4.9%).
Highly liquid balance sheet with liquidity coverage ratio of 325% (end-2023: 291%).

Nic Dreckmann, Chief Executive Officer ad interim of Julius Baer Group Ltd., said: “After a challenging start to the year, Julius Baer is now regaining its momentum. We are executing on the commitments we made on 1 February 2024, and along our strategic priorities. Our results for the first half of 2024 demonstrate that we have remained close to our clients, in order to support them as they position themselves for a new investment cycle. We have also continued to attract top-quality relationship managers and are thus investing in our future growth, while seeking to further enhance efficiency. Meanwhile we have strengthened our governance and risk management framework.”

Alternative performance measures and reconciliations

This media release and other communications to investors contain certain financial measures of historical and future performance and financial position that are not defined or specified by IFRS. Management believes that these alternative performance measures (APMs), including adjusting the results consistently for items related to M&A activities, provide useful information regarding the Group’s financial and operating performance. These APMs should be regarded as complementary information to, and not as a substitute for, the IFRS results. The definitions of APMs used in this media release and other communications to investors, together with reconciliations to the most directly reconcilable IFRS line items, are provided in the Alternative Performance Measures section of the Half-Year Report 2024, available at www.juliusbaer.com/reports.

AuM growth driven by rising stock markets, currency movements, and net inflows

In the first half of 2024, assets under management grew by CHF 46 billion (+11%) to CHF 474 billion. This increase was mainly driven by rising global equity market valuations, a positive currency impact from the weakening of the Swiss franc, especially against the US dollar, as well as net new money inflows, which were partly offset by the sale and deconsolidation of Kairos (AuM CHF 4.8 billion) in May 2024. Monthly average AuM increased by 5% year on year to CHF 457 billion, and including assets under custody of CHF 91 billion, total client assets rose by 10% to CHF 564 billion at the end of June 2024.

After a negative start in January, net new money recovered significantly over the subsequent months, resulting in total net inflows of CHF 3.7 billion (H1 2023: CHF 7.1 billion). Solid net inflows came from clients domiciled in strategic key markets in Europe (especially the UK, Germany, and Spain), Asia (particularly India and Singapore), and the Middle East (especially the UAE). Deleveraging by clients slowed considerably towards the end of the period. Excluding deleveraging, net new money amounted to CHF 3.9 billion (H1 2023: CHF 9.2 billion).

Increases in recurring income and client activity more than offset by higher interest expense

Operating income declined by 4% year on year to CHF 1,945 million and the gross margin decreased to 85 bp (H1 2023: 93 bp), as the positive impact of higher net commission and fee income and a rise in net income from financial instruments measured at fair value through profit or loss (FVTPL) was more than offset by higher balance sheet funding costs, leading to a decline in net interest income.

Net commission and fee income grew by 14% to CHF 1,093 million in H1 2024, with recurring income rising by 9% to CHF 858 million, well ahead of the year-on-year increase in monthly average AuM. Driven by stronger client activity, brokerage commissions grew by 24% to CHF 353 million. Commission expense rose by 9% to CHF 118 million.

Net interest income declined by 52% to CHF 223 million. Income from the treasury portfolio (the sum of interest income on debt instruments at fair value through other comprehensive income (FVOCI) and interest income on debt instruments at amortised cost) rose by 33% to CHF 309 million, and interest income on loans grew by 2% to CHF 858 million. However, further shifts of client assets from current accounts to time and call deposits resulted in a 39% increase in interest expense on amounts due to customers to CHF 926 million, while interest expense on amounts due to banks increased by CHF 81 million to CHF 114 million.

Net income from financial instruments measured at FVTPL increased by 7% to CHF 638 million. While treasury swap income declined slightly year on year, income related to FX, precious metals, and structured products rose, supported by higher client activity and selected volatility.

Other ordinary results decreased by CHF 6 million to CHF -2 million, reflecting a CHF 17 million loss on the sale of Kairos (of which CHF 11 million comprised cumulative FX translation differences).

Net credit losses on financial assets amounted to CHF 7 million (H1 2023: net credit recoveries of CHF 2 million).

Impact of continued investments in future growth balanced by lower provisions and accelerated cost programme

Operating expenses according to IFRS rose only marginally, by CHF 7 million year on year, to CHF 1,403 million. While personnel expenses increased by 4% to CHF 914 million and amortisation and impairment of intangible assets rose by 4% to CHF 69 million, general expenses fell by 7% to CHF 370 million, and depreciation of property and equipment decreased by 1% to CHF 49 million.

As in previous years, in the analysis and discussion of the results in the media release as well as in the Management Report section of the Half-Year Report 2024 (formerly in the Business Review document), adjusted operating expenses exclude M&A-related expenses (CHF 9 million, down from CHF 11 million in H1 2023). M&A-related amortisation and impairment of customer relationships decreased to CHF 3 million (H1 2023: CHF 8 million), while other M&A-related expenses increased to CHF 5 million (H1 2023: CHF 3 million). The reconciliations to the respective IFRS line items are provided in the Alternative Performance Measures section of the Half-Year Report 2024, available at www.juliusbaer.com/en/media-investors/financial-information/financial-reporting. On this basis, adjusted operating expenses rose by 1% year on year to CHF 1,394 million.

Adjusted personnel expenses grew by 4% to CHF 913 million, as the impact of a 7% year-on-year increase in the monthly average number of employees was partly offset by a decrease in performance-related remuneration. At the end of June 2024, the Group employed 7,484 full-time equivalents (FTEs), an increase of 58 from the end of 2023; of the total FTEs, 1,344 were relationship managers (RMs). This reflects the hiring of 21 new RMs in H1 2024 and the deconsolidation of 94 FTEs (of which 20 RMs) following the sale of Kairos.

Adjusted general expenses fell by 7% to CHF 366 million. Provisions and losses decreased by 79% to CHF 12 million. Excluding provisions and losses, adjusted general expenses rose by 5% to CHF 354 million, mostly driven by higher professional service fees and IT-related expenses.

While adjusted depreciation of property and equipment declined by 2% to CHF 49 million, adjusted amortisation and impairment of intangible assets rose by 13% to CHF 66 million, mainly reflecting higher IT-related investments in recent years.

The adjusted cost/income ratio (excluding adjusted provisions and losses) increased to 71% (H1 2023: 65%), primarily as a result of a year-on-year reduction in the overall gross margin.

As part of its ongoing efforts to enhance efficiency, Julius Baer increased its target for the 2023–2025 cost reduction programme from CHF 120 million to CHF 130 million (gross). On a run-rate basis, the programme had reached CHF 120 million by the end of June 2024. Based on the current outlook and a further increase in the scope of the programme, the CHF 130 million target is likely to be exceeded.

Lower revenues and continued investments drive 15% decrease in net profit

IFRS profit before taxes declined by 14% year on year to CHF 542 million. As income taxes were 12% lower at CHF 90 million, IFRS net profit decreased by 15% to CHF 452 million and IFRS EPS declined by 15% to CHF 2.20.

Adjusted profit before taxes declined by 15% to CHF 551 million and the adjusted pre-tax margin decreased by 5 bp to 24 bp. Adjusted income taxes declined by 12% to CHF 91 million, corresponding to an adjusted tax rate of 16.5% (H1 2023: 16.1%). Adjusted net profit for the Group decreased by 15% to CHF 460 million and adjusted EPS fell by 15% to CHF 2.24.

The adjusted return on CET1 capital (RoCET1) decreased to 29.5% in H1 2024 (H1 2023: 34.0%).

Strong and liquid balance sheet

Total assets grew by 3% compared to end-2023 to CHF 100 billion, mainly reflecting the weaker Swiss franc. Loans rose by 8% to CHF 42 billion, comprising CHF 34 billion of Lombard loans (+9%) and CHF 8 billion of mortgages (+2%). As due to customers (client deposits) increased by 5% to CHF 66 billion, the loan-to-deposit ratio rose to 63% (end of 2023: 62%).

Cash, largely held at central banks in Switzerland and Europe, decreased by 6% to CHF 9 billion. The total treasury portfolio, recorded under financial assets measured at FVOCI (down 8% to CHF 12 billion) and other financial assets measured at amortised cost (down 2% to CHF 5 billion), decreased by 7% to CHF 17 billion.

Equity attributable to shareholders of Julius Baer Group Ltd. increased slightly to CHF 6.2 billion.

Balance sheet liquidity improved further, with the liquidity coverage ratio increasing to 325% (end 2023: 291%), far exceeding the 100% minimum regulatory requirement.

Orderly wind-down of private debt portfolio proceeding as planned

Following the full loss allowance for the largest exposure in Julius Baer’s private debt loan book recorded in 2023, the wind-down of the remaining private debt loan book is progressing as planned. At the end of June 2024, the notional value of the debt book was CHF 0.6 billion, down from CHF 0.8 billion at the end of 2023 (after loan loss allowances). It is currently expected that the wind-down will be largely completed by the end of 2026.

Strongly capitalised

Julius Baer significantly strengthened its already solid capitalisation in the first half of 2024.

Compared to the end of 2023, CET1 capital rose by CHF 0.3 billion, or 10%, to CHF 3.3 billion, as the combined benefits of strong net profit generation and the continued ‘pull-to-par’ reversal of the decline, back in 2021 and 2022, in the value of bonds held in the Group’s treasury portfolio (financial assets measured at FVOCI) exceeded the impact of the dividend accrual. Tier 1 capital grew by CHF 0.4 billion (+8%) to CHF 5.2 billion, and total capital (also) by CHF 0.4 billion (+8%) to CHF 5.3 billion.

Risk-weighted assets (RWA) decreased by CHF 0.3 billion, or 2%, to CHF 20.0 billion. Credit risk positions declined by 1% to CHF 11.6 billion, operational risk positions decreased by 1% to CHF 6.2 billion, market risk positions fell by 7% to CHF 1.5 billion, and non-counterparty-related risk positions were unchanged at CHF 0.6 billion.

As a result, the CET1 capital ratio improved to 16.3% (end of 2023: 14.6%) and the total capital ratio increased to 26.3% (end of 2023: 24.0%). While the leverage exposure rose by 6% to CHF 103 billion, the tier 1 leverage ratio improved to 5.0% (end of 2023: 4.9%).

The Group’s capitalisation therefore remains robust: The CET1 and total capital ratios are well above the Group’s own floors of 11% and 15%, respectively, and far exceed the regulatory minimums of 8.4% and 12.6%, respectively, applicable at the end of June 2024. The tier 1 leverage ratio continued to be comfortably above the 3.0% regulatory minimum.

The results conference will be webcast live at 9.30 a.m. (CEST). All documents (presentation, Half-Year Report 2024, spreadsheets, and this media release) are available at www.juliusbaer.com.