Julius Baer upbeat on client activity despite slower second half

By Brenna Hughes Neghaiwi

ZURICH (Reuters) -Julius Baer remained upbeat on Wednesday about a pickup in client activity despite reporting a slowdown in the latter half of 2021, which raised some concerns about its outlook going forward.

Despite reporting 55% full-year profit growth and a significant uplift to proposed shareholder payouts, shares fell 6.1% in late morning trading as analysts pointed to a compression in profitability in the second half.

“Operationally, Julius Baer delivered in line with expectations, but margin weakness during the second half of the year keeps the question of what can be expected going forward hot,” analysts at Zuercher Kantonalbank said in a note.

Net profit climbed 55% to 1.083 billion Swiss francs ($1.18 billion) in 2021, as strong markets and a rise in fees it gets from managing cash for rich clients helped the Swiss bank surpass a billion-franc bottomline for the first time ever.

“I think we have an environment that is volatile and where there is a lot happening in the market,” Chief Executive Philipp Rickenbacher told journalists after the bank reported earnings. “Typically in the past, these environments have been beneficial for client trading and they have been beneficial for our business model.”

Wealth managers saw a boon from the coronavirus pandemic in 2020, benefitting from bumper client activity levels and fewer risks of loan losses than their high street peers.

That continued in the first half of 2021, when the Zurich-based wealth manager posted a 23.4% boost to six-month net profit, although there was a slowdown in the second half.

Julius Baer posted 19.6 billion francs in fresh client inflows for 2021, a growth rate of 4.5% and well above prior-year inflows. Combined with higher asset prices, that helped push the lender’s managed assets up 11% to a record 482 billion Swiss francs.

However, client inflows eased slightly in the second half, additional documents provided by the bank showed, while, on an adjusted basis, net profit from July through December dropped to 507 million francs, down from 636 million francs in the first six months. Costs were also up slightly more than analysts expected.

Switzerland’s third-largest listed lender proposed raising its dividend to 2.60 francs per share from the 1.75 francs it paid in 2020. It also announced a new share buy-back programme of up to 400 million francs, and said it would unveil a new mid-term strategy in May.

($1 = 0.9209 Swiss francs)

(Reporting by Brenna Hughes Neghaiwi, editing by John Revill and Bernadette Baum)