EFG International reported a net profit downgrade and a 6% fall in assets under management (AuM) in its 2011 first half results as it confirmed a pull-back on hiring and a re-focus on its core private banking services.
The Swiss-based private bank said it expects to achieve a core net profit between CHF140m to CHF160m ($175m-$200m) in 2011, compared to a target of CHF200m.
The bank acknowledged its cost base was too high despite reporting 35% growth in pre-tax profits to CHF60.6m for the first six months to 31 June 2011.
In the first half of 2011, AuM fell to CHF80.86bn, representing a 6% decline from CHF85.96bn in the second half of 2010. AuM also declined 9% on a year-on-year basis from CHF88.76bn as at 30 June 2010.
The bank blamed the poor results on challenging business conditions, particularly the strengthening of the Swiss franc and economic uncertainty.
Recruitment stalled, net new money down 43%
EFG stated that its asset management business will remain an integral part of private banking and will continue to serve client relationship officers (CROs) and clients.
EFG also acknowledged its CRO base grew too big too quickly from 226 private bankers at the time of its initial public offering in October 2005 to 660 as at June 2011.
The bank said this rapid recruitment put short-term performance in jeopardy, with current productivity below industry norm. It is unlikely to continue CRO recruitment at its earlier forecasted level.
As an indication, EFG’s cost-to-income ratio remains high – 82.8% compared to 81.5% for the same period last year.
EFG’s net new assets declined to CHF2.7bn in the first half of 2011, representing a 43% year-on-year fall, from CHF6.3bn as at 30 June 2010.