Recruitment policy, digitization and acquisitions are at the heart of the group’s strategy until 2025, presented by Philipp Rickenbacher.
The mixed figures for four months are offset by ambitious financial targets announced for the period from 2023 to 2025. These were the main topics covered by Julius Baer, who presented on Thursday an update on his goals for the coming years. After a fiscal year 2021 marked by a record net profit of more than 1.1 billion francs, the Zurich-based wealth management bank has set itself the goal of more than doubling the profitability of its asset base within a decade, Philippe Rickenbacher, its director, said in a statement. presentation time on Thursday for the media and investors.
400 million investment in technology by 2025
To achieve this, the group relies in particular on leveraging economies of scale by concentrating its efforts on a certain number of key markets, as well as on innovation, especially in terms of digitalisation. If personal connections remain one of the pillars of the bank’s strategy, they will be enriched by the contribution of modern technology, the director continued.
Between 2023 and 2025, Julius Baer plans to allocate an additional 400 million francs for technology investments, in addition to those already provided for in the current budget. These additional investments will be partly funded by savings of 120 million francs by 2025.
The share of discretionary powers is 25% of assets under management.
Over the next three years, Julius Baer intends to achieve a significant increase in revenue by increasing the share of discretionary mandates in assets under management. In 2020 it will be 16%, and in 2021 – 17%, and by 2025 the share of discretionary mandates should be about 25%.
Despite the austerity measures planned until 2025, the banking institution will continue to recruit staff. In practice, Julius Baer relies on three types of measures to support its growth in the coming years. The Bank refers to “positive net growth in its customer contact workforce”, which includes, in particular, those responsible for customer relations (“CRMs”) and their assistants, as well as investment advisors. However, unlike what was often the case until the middle of the last decade, Julius Baer did not disclose specific targets regarding the number of “public relations managers” the establishment plans to hire. The Bank also intends to develop the skills of its “in-house” talents, both in customer contact and support functions. In addition, the bank plans to ensure its growth through a “disciplined” acquisition policy that should extend beyond the 2023 to 2025 cycle.
Additional share repurchase possible
On the financial side, Julius Baer presented four main goals for the period from 2023 to 2025. The Bank aims to achieve a cost-to-income ratio below 64% by 2025 (compared to the current target of 67%), pre-adjusted margin. tax income of 28-31 basis points over three years (compared to 25-28 basis points at present), an annual increase of more than 10% in adjusted profit before tax for the period and adjusted income on so-called fixed capital (CET1). ) at least 30%.
Another key point: the group will return 50% of adjusted net income to shareholders. The Bank also reserves the right to buy back shares when the capital stock (CET1) exceeds the 14% mark at the end of the financial year, unless there is an acquisition opportunity that meets the group’s strategic criteria.
Cryptos and DeFi: keeping a long-term perspective.
The recent drop in the value of some cryptocurrencies does not undermine Julius Baer’s confidence in the need to keep up with current events in this area. The bank, which invested very early in SEBA, highlights a “broad move” towards the tokenization of traditional securities and illiquid assets, as well as innovation in decentralized finance (“decentralized finance” or DeFi). An opportunity for Philip Rickenbacher to draw a parallel with the situation in the early 2000s when the Internet bubble burst: “It was at this moment that the path opened for a whole sector that has now changed our lives,” he put into perspective.
Cash flow after four months
In the short term, the first four months of the year were marked by an outflow of money and a decline in assets under management amid the war in Ukraine and a slowdown in the Chinese economy due to restrictions imposed to combat the pandemic. At the end of April, assets under management amounted to 457 billion francs, which is 5% less than at the beginning of the year. The bank also suffered a net outflow of 2.7 billion francs due to reduced risk in its investment portfolios managed by Asian clients.
While a number of targets presented for the 2023-2025 period were generally well received by analysts, disappointment over the net outflow of new money after four months mattered more. Julius Baer’s stock closed Thursday sharply down 5.9% to 45.75 francs, with the Swiss market also seeing a downtrend.