EFG International has written off
nearly CHF860m ($816.7m) as investments in hedge funds Marble Bar
Asset Management (MBAM), CM Advisors (CMA) and DSAM sour. The Swiss
private bank said the impairment charges on the three specialist
product businesses were a “conservative step” and had no effect on
the bank’s cash flow or regulatory capital.
Hedge funds are increasingly seen
as risky assets by private banking customers who have responded
with more conservative investment approaches in the wake of the
financial crisis.
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The impairment charges at the
structured product specialists stood at CHF210m at CMA, CHF168m at
the Swedish specialist, DSAM, and CHF499m at MBAM, the biggest of
the funds.
Keith Gapp, head of strategic
marketing and communications at EFG International, told
PBI MBAM is an area of concern for EFG International in
terms of a return to profit.
“The jury is out [on MBAM] and they
have to come back quite some distance [compared to DSAM and CMA].
They have to fight their way back,” Gapp said.
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By GlobalDataSpecialist products
‘underperform’
Gapp said too much time and
attention has been devoted to the specialist product activities
which have always been the marginal parts of the bank’s
activity.
“Disappointingly, a number of
specialist product businesses have continued to under-perform, and
we have adopted the conservative approach of writing down the
goodwill associated with them,” said Lonnie Howell, chief executive
of EFG International.
EFG International said it remained
well capitalised despite very little profit contribution from the
hedge funds.
Net profit up
17%
The write-down came as EFG
International reported net profit of CHF88.4m for the first half of
2010, up 17% on the same period last year.
Net new assets from private clients
were CHF6.3bn, up 16% from the year-ago period on an annualised
basis.
Client assets under management were
CHF87.5bn, up from CHF86.2bn as at the end of 2009, and up 9%
year-on-year. The number of relationship managers stood at 665, up
from 650 as at the end of 2009.
Jean-Christophe Pernollet is to take over as EFG International
chief financial officer.
