Swiss private bank Julius Baer has reported a considerable improvement in profitability for the first nine months of 2020, reflecting client engagement and cost-cutting measures.

Commenting on its performance, the bank said: “Supported by ongoing active client engagement, operating income was considerably higher in the first nine months of 2020 than in the same period a year ago.

“At the same time, the cost-reduction initiatives drove operating expenses lower.”

However, the bank also flagged a €177m ($207 million) goodwill impairments in its yearly results related to its Italian asset management arm Kairos.

Highlights

The group’s assets under management (AuM) reached CHF413bn as of 30 September 2020 driven by stock market recovery and net new money inflows.

This marks a 3% rise since June and a fall of 3% since the end of 2019.

The gross margin in the first nine months of this year was just over 89 basis points (bp), versus 92 basis points in the first six months of 2020 and 82 basis points in 2019.

The adjusted cost/income ratio for the first nine months of 2020 stood at 66.1%, as against 66.6% at the end of June 2020 and 71.1% in 2019.

The Group’s BIS CET1 capital ratio was 14.3% at September-end 2020, compared with 13.9% at the end of June 2020 and 14% at the end of last year.

The BIS total capital ratio was 20.2% at the end of September 2020, compared with 20.0% at the end of June 2020 and 22.1% at 2019-end.

The ratios were above the regulatory requirements of 7.9% and 12.1%, respectively.

Kairos development

Julius Baer announced a new entrepreneurial ownership structure for Kairos, under which it will retain a 70% stake in the Italian business.

Some key investment managers of Kairos will hold minority stakes.

Kairos’ AuM totalled CHF5bn as of 30 September 2020 and outflows at the business reduced over the past months, noted Julius Baer.

Other strategic initiatives

The Swiss bank finalised the divestiture of its Bahamas business to Ansbacher (Bahamas) this month for an undisclosed sum.

Moreover, this month, the bank launched the roll-out of a new compensation framework, targeting at its relationship managers.

The framework will be effective in key markets from 1 January 2021.