July 22, 2019 / 5:23 AM / in 7 months

Julius Baer misses new money goal on Kairos outflows

ZURICH (Reuters) - Swiss private bank Julius Baer (BAER.S) missed its target for net new client money in the first six months of the year as outflows from funds at its Italian subsidiary Kairos hampered growth at the rest of the business.

FILE PHOTO: The sign for Swiss bank Julius Baer is seen at a branch office in Luzern, Switzerland, November 23, 2017. REUTERS/Arnd Wiegmann/File Photo

Switzerland’s third-largest listed bank said it brought in 6.2 billion Swiss francs (£5.05 billion) of net new money, up 3.2% on an annualised basis, and that growth would have reached its 4-6% target range without the outflows from Kairos.

Private banks are struggling with low interest rates, choppy markets, and risk-averse clients, while Julius Baer is also feeling the effect of poor fund performance at Kairos last year.

The bank is considering options for Kairos - including divesting it, forming a partnership or keeping it and trying to improve profitability - and intends to make a decision soon, outgoing Chief Executive Bernhard Hodler said on Monday.

“Outflows (from Kairos) were mainly due to performance in 2018, that was not so fantastic ... This year is actually good. Based on that, I expect the outflows will slow down or stop,” Hodler told analysts and journalists at his last earnings conference for the bank.

“Maybe our announcement to look into strategic options also created a bit of uncertainty, so we are very mindful. We will communicate our strategy very soon with Kairos.”

Hodler is due to be replaced by the bank’s current head of intermediaries and global custody, Philipp Rickenbacher, in September.

While Baer’s overall inflows have picked up since late 2018, margins remain under pressure.

It posted a 19% decline in adjusted net profit to 391 million francs in the six month period as tepid trading continued from its wealthy clients, although it said that was a pick up from challenging conditions late last year.

The bank’s shares were up 2.8% at 1040 GMT.

In February, Julius Baer scaled back growth targets and announced large-scale cost cuts after a tough end to 2018 caused it to miss its goals.

It said on Monday the programme, which aims to save around 100 million francs by cutting its workforce by around 2% and moving out of less attractive markets, was on track.

It is aiming to hit an adjusted cost-income ratio below 68% by 2020, an improvement on the 71% posted through June.

Reporting by Brenna Hughes Neghaiwi; Editing by Michelle Martin and Mark Potter

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