Thailand Financial News

The Julius Baer Group increased its assets under management by 5% to CHF 320 billion in the first half of 2006. Net new money development was positive in both Private Banking (CHF 1 billion) and Asset Management (CHF 14 billion).
On a comparable basis*, operating income rose year-on-year by 24% to CHF 1,394 million.

Operating expenses were up by 15% to CHF 853 million reflecting various growth initiatives, in particular in Asia. Net profit compared to the first half of 2005 was up by 27% to CHF 404 million. As well as the rapid integration and strengthening of the business in its established core markets, the accelerated move into international growth areas has produced promising successes. “We can look back on an encouraging first reporting period of the new Julius Baer Group. The development of assets under management as well as profitability show that we are correctly positioned and that our growth initiatives are progressing according to plan,” sums up Johannes A. de Gier, Group CEO. “Integration is moving ahead on schedule, and the two business divisions continue to increase co-operation and realize significant synergies. This factor combined with our continued focus on selective business expansion means we are well on the way to achieving our financial goals set for 2008.           Our loyal client base and our highly committed employees provide a strong basis for this,” Johannes A. de Gier continues. Assets under management: encouraging development of net new money Assets under management of the Julius Baer Group reached CHF 320 billion on 30 June 2006 (excluding CHF 52 billion in the Global Custody business). This increase is almost exclusivelyattributable to net new money inflows totaling CHF 15 billion. “The vast majority of Julius Baer Group’s assets under management are held on behalf of private clients. CHF 163 billion or 51% are assets held by private clients of Julius Baer and GAM, CHF 105 billion or 33% are assets held by clients who have used independent third parties to access our investment products, and CHF 52 billion or 16% are assets held by institutional clients,” comments Johannes A. de Gier. Increased earnings power as a foundation for growth Operating income increased by 24% to CHF 1,394 million compared to the first half of 2005. Particularly good results were recorded in commission and service fee-based activities which rose by 22% to CHF 1,137 million, predominantly driven by increased asset levels. Trading revenue also improved over the same period by 71% to CHF 153 million, resulting from a notable increase in trading activity.
Operating expenses increased by 15% to CHF 853 million compared to the first half of 2005. Personnel expenses were up by 26% to CHF 608 million as a result of higher asset levels, higher revenue and investments in people as part of the growth initiatives. General expenses were 5% higher at CHF 217 million. Depreciation costs dropped by 31% to CHF 22 million, and losses and provisions were down 75% to CHF 6 million. Cost synergies of CHF 34 million have been achieved in first half of 2006 (CHF 78 million annualized). The cost/income ratio has declined from 64% in the first half of 2005 to 61% in the first half of 2006. Net profit increased year-on-year by 27% to CHF 404 million. Return on equity for the first half of 2006 was 23.6% compared to 22.3% for the first half of 2005. Financial strength as a solid basis for further growth The consolidated balance sheet total grew by 17% to CHF 33.6 billion in the first half of 2006. At CHF 6.4 billion, shareholders’ equity was 4% higher than at the end of 2005. With a BIS Tier 1 ratio of 13.8% (year-end 2005: 12.7%) the Julius Baer Group (rated Aa3 by Moody’s) continues to enjoy a very solid financial base, from which to support a number of growth initiatives. Private Banking: improvements on a broad front Assets under management in Private Banking rose by CHF 1 billion to CHF 123 billion in the first half of 2006 (year-end 2005: CHF 122 billion). This increase was solely attributable to the favorable development of net new money. In the core markets, the asset base was stabilized through targeted measures to improve client retention, and in the growth markets, new client relationships resulted in the positive development of net new money. The division’s operating income rose by 14% to CHF 585 million. Despite the simultaneous integration and expansion activities, operating expenses were up by only 10% to CHF 376 million, thanks in part to cost synergies amounting to CHF 21 million. As a result Private Banking’s net profit before taxes thus increased by 23% to CHF 209 million. The gross margin improved from 91 to 94 basis points, and the cost/income ratio remained relatively stable at 64% (63%). “The very encouraging development of our key performance indicators is an important initial indicator that our business strategy is working. Julius Baer Private Banking’s focus on the needs of our clients creates trust and stability in our established markets. And in our efforts to move into growth markets, we have already enjoyed some success thanks to the extensive expertise and outstanding networks of our relationship managers,” remarks     Alex W. Widmer, CEO Private Banking. The focused approach to the integration measures has contributed greatly to the high degree of client and employee retention. Since April, Private Banking has operated under the single Julius Baer brand. In parallel with the demanding integration work, efforts remained focused on core markets with the opening of additional offices in Germany and Austria. As part of the selective move into promising growth markets, Private Banking focused on strengthening its presence in Asia and the Middle East. A representative office in Hong Kong opened at the end of March 2006 and progressed well. It was followed by the expansion of our Singapore operation. Additional projects included expanding the advisory capacity for the Central and Eastern European markets and the opening of an office in Buenos Aires. Asset Management: Integration advanced and enhanced distribution capability already visible Assets under management in the Asset Management division grew by 8% or CHF 15 billion to CHF 197 billion by mid-year. The majority of this increase was attributable to the net new money inflows of CHF 14 billion. GAM managed CHF 76 billion (+5%) of assets at the end of June 2006. Julius Baer’s successful and growing asset management business in the USA accounted for CHF 52 billion (+10%), and the European business managed CHF 69 billion
(+11%) of assets. Thanks to the increased asset base, the division’s operating income rose by 29% to CHF 760 million. Operating expenses were up by 17% to CHF 401 million. Overall, Asset Management’s net profit before taxes climbed to CHF 359 million (+46%). The gross margin declined from 82 to 77 basis points. The cost/income ratio fell from 57% to 52%. The integration process in Asset Management is well advanced, with more benefits being realized than were apparent at the time of the acquisition. The harmonized product and service offering now supports a more extensive range of client and product needs ranging from value-orientated funds to sophisticated and innovative investment solutions. The launch of new public funds and special mandates in the USA and Europe is consistent with our belief in the growth potential of the business. Furthermore, the robust growth of the private label fund and global custody businesses underscores the strong market position of Julius Baer in these areas. GAM’s intensified efforts to tap into new external distribution channels have already resulted in a notable inflow of new money. GAM’s Absolute Return discretionary mandates are becoming a core Private Banking offering and reached more than CHF 1.1 billion – sooner than expected. The Markets business has completed its reorientation towards an internally focused service team whose priority is Private Banking, along with a very targeted third-party business. The Alternative Solutions unit with Markets is showing significant success in the design, manufacture, promotion and distribution of structured products for the Group, particularly using GAM funds. “We are fully committed to our core objective of delivering long-term outperformance to our clients by having the best people, the right products and the requisite skills to navigate the complexities of the market. Continuing to build a flat, open, collaborative performance-driven culture across the entire division that allows our talented investment managers to flourish is imperative. We will continue to focus on developing and managing a global distribution effort across the GAM and Julius Baer product range by maintaining market awareness of the two brands and their distinctive investment offerings. The integration process has already led to significant benefits for the Asset Management division, and there is good long-term growth potential across the businesses,” notes David M. Solo, CEO Asset Management. * For better clarity, the year-on-year comparison of the consolidated financial results for the first half of 2006 in this press release is based on pro-forma figures, calculated as if the acquisition of the three private banks and GAM had occurred on 1 January 2005. Integration and restructuring expenses, amortization of intangible assets and significant financial events are therefore excluded from the data for the reporting period as well as for the comparison period. Including these positions, the net profit for the first half of 2006 amounted to CHF 314.0 million. Additional information on the real consolidated financial results, which do not represent a comparable basis, are available at www.juliusbaer.com in the 2006 half-year report of Julius Baer Holding Ltd. –www.theasianbanker.com (July  31  2006)–