Julius Baer freezes hiring as earnings drop 26% in first half

Zurich — Swiss wealth manager Julius Baer will freeze hiring for non relationship manager positions after higher costs and lower client activity triggered a 26% drop in first half earnings.

The bank, which competes with UBS and Credit Suisse in managing the investments of ultra wealthy clients, said on Monday it would accelerate “cost discipline” in the second half of the year after its cost/income ratio rose to 67% from 61% a year earlier.

CEO Philipp Rickenbacher said there were no immediate plans for layoffs at the bank, which has seen its headcount rise by 71 people in 2022, to 6,798 staff by the end of June.

“We have taken a very cautious stance throughout this year and will continue to do so even more in the second half,” Rickenbacher said. “The measures such as slowing down discretionary spending plus a hiring freeze of non RM positions will clearly help us there.”

Plans for structural cost savings were now being developed, he said, while the bank would continue to hire relationship managers.

Kicking off a week of reporting by Switzerland’s big banks, Julius Baer said costs rose as it spent more on settling legal cases, provisions and IT.

Earlier this month the bank settled a case in relation to a Lithuanian corporation for 105 million euros, with roughly half of the amount charged against its 2022 first-half results.

Meanwhile income declined, with revenue from commission and fees down by 10% as nervous clients cut back on activities.

Rickenbacher said the period — during which global stock markets plunged — included “unprecedented geopolitical events that had a deep impact on asset valuations and client sentiment”.

Net profit attributable to shareholders fell to Sf451m ($468m), missing analyst forecasts for Sf477m according to Refinitiv.

The company’s shares fell 3.4% in early trading on Monday.

The market downturn shrank assets under management by 11% to Sf428bn. Net new money also fell Sf1.1bn as clients, particularly in Asia, de-risked their investment portfolios and reduced leverage.

The bank, however, said the situation had improved, with net new money of Sf1.5bn since the end of April.

“Given that JB introduces a hiring freeze for non-relationship manager positions in the [second half of 2022], it does not seem to expect a quick recovery in activity,” Bank Vontobel analyst Andreas Venditti said.

Reuters