At the end of April 2013, Julius Baer Group’s assets under management (AuM) amounted to CHF 220 billion, an increase of 16% from the CHF 189 billion at the end of 2012. This includes approximately CHF 24 billion from Merrill Lynch’s International Wealth Management (IWM) business outside the US, which Julius Baer is in the process of acquiring. Total client assets grew by 12% to CHF 309 billion.
Julius Baer is targeting to acquire between CHF 57 billion and CHF 72 billion of AuM from IWM over the next two years. The approximately CHF 24 billion AuM from IWM reported at the end of April 2013 comprise CHF 11 billion AuM of Merrill Lynch Bank (Suisse) S.A. in Geneva which was acquired on 1 February 2013 as well as approximately CHF 13 billion AuM from the IWM businesses in Uruguay, Chile, Luxembourg and Monaco, which were transferred to Julius Baer on 1 April 2013. In relation to the latter four locations, the client custody relationships are at this point still on the platform of Bank of America Merrill Lynch (BAML). In line with the transfer mechanism communicated last year, the revenues related to these client assets are allocated to Julius Baer, and Julius Baer is charged platform allocation costs by BAML. Starting in July 2013, the client custody relationships of these legal entities will also be transferred (in stages) to Julius Baer and booked on the Julius Baer platforms. At those points in time Julius Baer will pay BAML the agreed acquisition value (1.2% of transferred AuM), and the BAML platform allocation charges will cease.
Outside the acquisition impact, the increase in AuM in the first four months of 2013 was driven by a positive market performance, a positive currency impact, as well as net new money. Net inflows in the first four months 2013 were volatile and, on an annualised basis, somewhat below the Group’s medium-term target range. Julius Baer continues to have a positive view on the potential for inflows from the growth markets. However, total group net new money in 2013 will be impacted by the implementation of Switzerland’s final withholding tax agreements with the UK and Austria as well as the ongoing self-declarations by clients in other European countries (as continued to be recommended by Julius Baer); as a consequence, net new money for the full year 2013 could be close to the lower end of the 4-6% medium-term target.
Including the IWM businesses transferred in February and April 2013, the gross margin in the first four months of 2013 was 98 basis points (bps) and the cost/income ratio* improved to below 70%, compared to 71.6% achieved by Julius Baer in the second half of 2012 (when no IWM businesses had been transferred yet). The improvement in the cost/income ratio resulted despite the fact that the transferred IWM businesses currently operate at a higher cost/income ratio than the Group average and despite the fact that cost synergies are only expected to be realised at a later stage in the integration process. Between the principal closing of the IWM transaction on 1 February 2013 and the end of April 2013, on a net basis more than a hundred IWM financial advisers have been transferred to Julius Baer. Excluding the transferred IWM businesses, Julius Baer achieved in the first four months of 2013 a gross margin of 99 bps, an increase of 5 bps from the 94 bps level achieved in the second half of 2012. This recovery was driven by an improvement in client activity.
Julius Baer remains very well capitalised. At the end of March 2013, the Group’s BIS total capital ratio (under Basel III) stood at 27.5% and the BIS tier 1 ratio at 25.6%, well above the targeted floors of 15% and 12%, respectively.Julius Baer Group’s detailed financial results for the first half of 2013 will be published on 22 July 2013.