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Julius Baer increases net profits by seven per cent in 2009

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Swiss private banking group Julius Baer increased its net profits by seven per cent to CHF473m at the end of 2009, while total client assets increased by 25 per cent to CHF241bn.

The increase in client assets was the result of a positive market performance impact of CHF20bn driven by positive returns for most asset classes during 2009, net new money of CHF5bn, the acquisition of Alpha SIM in Milan, which added CHF0.6bn, and a minor negative currency impact of CHF0.7bn.

Net new money development, within the targeted four to six per cent range, was the result of continued strong inflows from emerging markets and in particular Asia, being partly offset by outflows due to the Italian tax amnesty and the announced phased exit from the US business.

Of total assets that were declared by clients taking advantage of the Italian tax amnesty, some 60 per cent remained with Julius Baer.

The reported assets under management do not include the CHF14bn year-end assets under management resulting from the acquisition of ING Bank (Switzerland), which closed in January 2010.

Assets under custody ended the year at CHF87bn after CHF64bn at the end of 2008, an increase of 37 per cent, reflecting positive market performance as well as CHF13bn in net new custody assets.

Operating income declined by five per cent to CHF1,586m, driven by three per cent lower average assets under management and a slightly lower gross margin of 111 basis points.

Net fee and commission income declined by 15 per cent to CHF819m on the back of decreased average asset levels, a lower level of actively managed assets, and a changed asset mix based on private clients’ more conservative investment stance.

Net interest income rose by three per cent to CHF467m, the result of higher average deposit levels, decreased average lending to private clients, and net interest margins which were relatively high in the first half of 2009 but, as expected, contracted in the second half of the year to more normal levels. While average lending to private clients decreased year on year, the second half of 2009 saw a turnaround in loan volumes compared with the first half.

Net trading income declined by 13 per cent to CHF299m as the decrease in client-driven foreign exchange trading volumes was only partly offset by an increase in client-driven fixed income trading.

Operating expenses were managed down a further eight per cent to CHF1,026m. Notwithstanding the continued investments in growth, in particular through the further expansion of the base of relationship managers by net 48 to 667, the increase in the overall number of employees remained limited to one per cent, taking the total staff level to 3,078. Despite this increase, personnel expenses were reduced by eight per cent to CHF683m, mainly on the back of lowered performance-related compensation and a decrease in share-based payments.

General expenses, including valuation adjustments, provisions and losses, were down by 13 per cent at CHF296m. As a consequence, the cost/income ratio for 2009 improved from 65.3 per cent to 63.1 per cent.

Accordingly, profit before taxes increased by three per cent to CHF560m, representing a pre-tax margin of 39 basis points. Income taxes declined to CHF87m, representing an effective tax rate of 16 per cent, which compares to 18 per cent in 2008. As a result, the adjusted net profit improved by seven per cent to CHF473m, and earnings per share came to CHF2.29.

Total assets were unchanged at CHF 42.7bn. Client deposits went up by CHF1.7bn to CHF27.3bn, and lombard lending and mortgages increased by CHF0.6bn to CHF10.4bn, thus resulting in a continued conservative loan-to-deposit ratio of 0.38, underlining the sound liquidity situation of the Group.

Total equity was up by 20 per cent to CHF4.2bn, and BIS tier 1 capital grew to CHF2.7bn.

The board of directors will propose to the ordinary annual general meeting on 8 April 2010 a dividend of CHF 0.40 per registered share.

Boris F.J. Collardi (pictured), chief executive officer of Julius Baer Group, says: “I am very pleased with our group’s performance in a year of significant strategic repositioning and given the demanding financial markets. Thanks to Julius Baer’s very sound financial base, clear strategic direction and comprehensive footprint in Switzerland and abroad, we are well positioned to cope with what we perceive is a fundamentally changing business environment facing our industry. Our priorities therefore remain unchanged: to capture further growth and to capitalise on potential market opportunities.”

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