Julius Baer’s assets under management (AuM) grew to CHF 254 billion last year ($280 billion), an increase of CHF 65 billion, or 34%. This included CHF 53 billion from Merrill Lynch’s International Wealth Management (IWM) business, which Julius Baer is in the process of acquiring.
The IWM integration developed successfully during 2013. Based on current expectations, it is envisaged that by the end of the integration process in early 2015 the Group will achieve the asset transfer target, towards the lower end of the CHF 57 bn to CHF 72 bn range, which would thereby also reduce the maximum total transaction price.
“After a period of intense preparations, the implementation of the IWM integration process paid off in 2013, resulting in an impressive transfer of clients, assets and highly-rated IWM professionals to Julius Baer. In 2014, our focus will shift to improving the cost efficiency of the rapidly grown business, while not losing sight of our ambition to continuously deliver top-quality advice and services to our growing international base of sophisticated clients”, said Boris F.J. Collardi, Chief Executive Officer of Julius Baer Group Ltd.
Outside the contribution from IWM, the increase in AuM was mainly the result of net new money of CHF 7.6 billion or 4% and a positive market performance of CHF 7 billion, partly offset by a negative currency impact of CHF 3 billion. Net new money was driven by continued net inflows from the growth markets and from the local business in Germany, while the inflows in the cross-border European business were more than offset by tax regularisations of legacy assets. Assets under custody came to CHF 93 billion, up by 6% from the CHF 88 billion at the end of 2012. Total client assets amounted (including assets under custody) to CHF 348 billion, an increase of 26% since the end of 2012.
According to the figures published by the company, operating income rose to CHF 2,195 million, an increase of 26%, in line with the growth in monthly average AuM (to CHF 229 billion). The full-year gross margin for the Group (including the IWM businesses acquired during the year) therefore remained at 96 bps.
In 2013, adjusted operating expenses went up by 29% to CHF 1,611 million. The increase in expenses was substantially attributable to the transfer of the IWM businesses in 2013. The total number of employees grew by 1,669 full-time equivalents (FTEs) to 5,390 FTEs, a rise of 45%, including a net 1,220 FTEs from IWM. The number of relationship managers grew by 391 FTEs to 1,197 FTEs, of which 365 FTEs from IWM. As a result, the adjusted personnel expenses went up by 20% to CHF 984 million. Adjusted general expenses rose by 54% to CHF 536 million. This increase was significantly driven by a shift from a CHF 17 million net release to a CHF 46 million net charge for valuation allowances, provisions and losses. Adjusted general expenses included CHF 35 million of costs related to the US tax situation (2012: CHF 38 million), of which CHF 15 million was a provision for expected future legal fees. As a result, the adjusted cost/income ratio improved to 71% (2012 restated: 73%). Excluding the expenses related to the US tax situation, the adjusted cost/income ratio was 70% (2012 restated: 71%).
Adjusted net profit, reflecting the underlying operating performance, went up by 19% to CHF 480 million and adjusted earnings per share by 12% to CHF 2.24.
IFRS net profit declined by 30% to CHF 188 million, as the improvement in operating results was more than offset by the impact (as planned) of the IWM-related integration and restructuring expenses, the ongoing amortisation of acquisition-related intangible assets, and a provision in relation to the withholding tax treaty between Switzerland and the UK.
The Group’s capital position remained solid, with a year-end BIS total capital ratio of 22.4% and a BIS tier 1 capital ratio at 20.9%.