Provisions for an old litigation case affected expenses and hence the headline results. A drop in markets also dragged down assets under management.

Julius Baer today said that pre-tax profit, on an IFRS accounting basis, fell 27 per cent to SFr513 million ($532 million) in the first half of 2022, while IFRS net profit attributable to shareholders fell 26 per cent to SFr451 million. 

Results were affected by a large rise in provisions and losses following the settlement of a legacy litigation case. On 30 June this year the Swiss bank resolved a claim by the liquidator of a Lithuanian corporation filed with in Geneva in 2019, related to matters dating back more than 10 years. (The claim was for €335 million ($343 million) plus 5 per cent interest per annum since December 2011. About half of the settlement of €105 million was covered by provisions in place prior to 2022. The balance of SFr55 million was charged against the 2022 half-year financial results.)

The Zurich-listed bank said adjusted pre-tax profit fell 27 per cent to SFr542 million and the adjusted pre-tax margin by 9  to 24 basis points. 

In the first half of 2022, assets under management fell by SFr54 billion to SFr428 billion as stock and bond markets slid from the start of this year. 

AuM related to corporate divestments represented SFr6 billion, primarily the result of the completion of the divestments of Wergen & Partner Wealth Management, announced in January 2022, Fransad Gestion, announced in June 2022, and the deconsolidation of NSC Asesores, Asesor en Inversiones Independiente, following the reduction of Julius Baer’s participation from 70 per cent to 19.9 per cent in that Mexican business, as announced in February 2022.

Including assets under custody of SFr68 billion, total client assets declined by 12 per cent to SFr496 billion.

The bank said it logged net new money of SFr1.5 billion from the end of April this year, partly compensating for the SFr2.7 billion net outflows recorded in the first four months of 2022, as previously reported. The group recorded SFr1.1 billion of net outflows in the first six months of 2022.

Clients domiciled in Western Europe, especially in Germany, Luxembourg, and the UK, continued to contribute meaningfully to inflows throughout the period, and net new money from clients domiciled in the Middle East turned positive after April. 
 

Russia exposure
The bank said it has credit exposure to a “single-digit” number of clients affected by sanctions imposed on Russia following its invasion of Ukraine in late February. The exposure is in the form of mortgage loans at “conservative lending values” against residential properties in prime locations in Western Europe, as well as a marginal Lombard credit exposure fully covered by pledged liquid assets collateral, Julius Baer said.

To date, Julius Baer has not recorded any credit losses directly related to the Russia/Ukraine situation, it said.

“Julius Baer’s market risk exposure to Russia is not significant and is tightly managed. Julius Baer has initiated the wind-down of its advisory subsidiary in Moscow, in compliance with local regulations and contractual agreements. The net asset value of this entity on 30 June 2022 was SFr1.2 million."

In the first six months of 2022, SFr900 million of AuM was reclassified to assets under custody after the asset freezes caused by the sanctions. At the end of June 2022, about 1.6 per cent of Julius Baer’s assets under management were related to Russian persons neither entitled to residency in the European Economic Area nor in Switzerland. Under sanctions imposed by the European Union and Switzerland, the acceptance of deposits in excess of €100,000 from such clients is banned.