Julius Baer: Interim Management Statement for the first ten months of 2023

Zurich, – In the first ten months of 2023, Julius Baer enjoyed generally solid operating momentum, with net inflows supporting the growth of assets under management. Investments in future growth continued, with an additional 75 (net) relationship managers were successfully onboarded in the first ten months of the year and with a promising pipeline supporting further hiring. Julius Baer remains solidly capitalised: Fuelled by ongoing resilient profitability, the Group’s CET1 capital ratio improved to 16.1% by the end of October 2023. Following a rise in credit provisions in November and a year-to-date increase in the effective tax rate, the Group currently does not expect the full year 2023 net profit level to reach the one achieved in 2022, which was the second best in the Group’s history.

Assets under management growth driven by net inflows and market performance In the first ten months of 2023, assets under management rose by CHF 11 billion (3%) to CHF 435 billion. The increase was driven mainly by continued net new money inflows and a net positive global equity market performance, partly offset by a negative currency impact resulting from the Swiss franc’s year-to-date strengthening against most major currencies.

Net new money inflows continued, reaching CHF 10.3 billion (3% annualised) by the end of October 2023, despite the impact of further client deleveraging. Excluding the impact of deleveraging, net new money amounted to CHF 13.7 billion (4% annualised), with solid contributions from clients domiciled in Europe (especially Switzerland, the UK & Ireland, Luxembourg, Spain, and Germany), Asia (especially Hong Kong and Japan), the Middle East (especially the UAE), and Israel.

Gross margin over 89 basis points The gross margin for the first ten months of 2023 exceeded 89 basis points (bp), an improvement from the 87 bp reported for full year 2022.

In the July–October 2023 period, the gross margin was over 83 bp, a decline from the 93 bp reported for the first half year of 2023. The latter decrease was driven mainly by a lower contribution from net income from financial instruments measured at FVTPL**, which was impacted by a notable decline in client activity in an environment of lower market volatility, and to a lesser extent by a modest reduction in treasury swap income. In the July–October 2023 period, the contribution from net interest income also moderated slightly (compared to H1 2023), following a further rise in the cost of deposits, as clients continued to shift current account balances into time and call deposits.

Cost/income ratio close to 68%, pre-tax margin stable at 27 bp, higher effective tax rate 2023 is the first year of the Group’s new three-year strategic cycle, for which Julius Baer has increased its focus on making targeted growth investments, including accelerated hiring of top talent in its key markets. In the first ten months of 2023, the number of relationship managers grew by 75 FTEs (net) to 1,323.

Partly as a result of these and other ongoing growth investments, the adjusted cost/income ratio for the first ten months of 2023 increased to close to 68%, above the 66% reported for full year 2022. However, the adjusted pre-tax margin was unchanged at 27 bp.

The adjusted tax rate increased to 16.5% over the first ten months of 2023, compared to 12.4% for full year 2022. The increase in the effective tax rate is the result of a larger pre-tax profit contribution from higher-tax jurisdictions.

Strongly capitalised Julius Baer’s solid capital position strengthened further. The Group’s CET1 capital ratio improved to 16.1% at the end of October 2023 (end 2022: 14.0%) and the total capital ratio grew to 25.3% (end 2022: 21.2%). 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 8.2% and 12.4% respectively.

The Group’s tier 1 leverage ratio improved to 5.2% (end 2022: 4.3%), substantially above the regulatory requirement of 3.0%.

Credit update As part of the prudent management of its balance sheet, Julius Baer regularly reviews the quality of its loan book. As of 19 November 2023, the Group had booked valuation adjustments totalling CHF 82 million (CHF 66 million net of taxes), of which CHF 70 million was booked against the Group’s credit portfolio after 31 October 2023.

The overall quality of the loan book and the balance sheet remains unaffected, with a consistently strong capitalisation and high liquidity providing ample capacity to absorb any risks resulting from the Group’s business.

Mainly as a consequence of the rise in credit provisions and the aforementioned increase in the effective tax rate, the Group currently does not expect the full year 2023 net profit level to match the one achieved in 2022.


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