The bank's full-year 2024 figures appeared to rattle investors, and its shares were down more than 12 per cent yesterday. Julius Baer has shrunk its board, and extended cost cuts that will likely see about 5 per cent of its payroll cut.

Yesterday, Julius Baer said it has boosted its cost-cutting 2023-25 programme as the Zurich-listed bank seeks to boost profit margins. The lender also shrunk its board by 15 members to five, and announced full-year financial figures that reportedly disappointed forecasts. Shares fell heavily yesterday on the SIX bourse.

Last year, the bank had boosted its cost reduction programme; by the end of 2024, underlying initiatives had reached SFr140 million ($153 million), gross, on a run-rate basis. Despite such savings, Julius Baer said its adjusted cost/income ratio is still “far removed” from the less than 64 per cent target it had originally set for this year. So more cuts are needed, and a further SFr110 million gross general expenses and personnel cost savings, on a run-rate basis, are planned by the end of 2025.

Giving figures for 2024, Julius Baer said it logged higher operating costs, reflecting more hiring and spending on technology. In adjusted terms, its cost/income ratio was 70.9 per cent, against 69.1 per cent in underlying terms for 2023.

The results announcement, and cost-cutting drive, is an important test for Stefan Bollinger, who took the up the CEO role last year vacated earlier in 2024 by the exit of Philipp Rickenbacher, following heavy losses sustained by the bank from loans to a conglomerate.

The cost cuts will equate to 400 jobs in Switzerland or 5 per cent of the workforce, deputy CEO Nic Dreckmann told reporters in a media call (source: Bloomberg). The cuts come at a time when the Alpine state has already had to digest the fallout from the UBS-Credit Suisse merger in 2023.

Operating income growth was moderated by a year-on-year rise in interest expense. On an IFRS basis of accounting, Julius Baer’s net profit rose 125 per cent year-on-year to SFr1.022 billion. 

Shareholders appeared concerned about the results. Shares in the bank slumped 12.8 per cent at SFr56.06 per share.

Changes to the executive boards
The bank said that the boards of Julius Baer Group Ltd and Bank Julius Baer & Co Ltd would be “substantially resized” and consist of the following individuals:

-- Stefan Bollinger, chief executive; 
-- Nic Dreckmann, chief operating officer and deputy CEO; 
-- Oliver Bartholet, chief risk officer; 
-- Evie Kostakis, chief financial officer; and 
-- Christoph Hiestand, group general counsel. 

The CEO will assume direct responsibility for all revenue-generating activities and the front business, with the region heads and the heads of markets and of investment and wealth management solutions reporting directly to him. The COO’s remit will be expanded to cover the areas of client strategy and experience and HR and corporate affairs.

“A new leadership structure and a leaner executive board will increase accountability, instil disciplined entrepreneurship top down, and reinforce our enduring client focus. This is the first move to create a leaner, more straightforward way of running our business. We are going to apply the same principles through the entire organisation,” Bollinger said. 

Julius Baer said it will give a strategy update, including new medium-term targets, ahead of the summer. More details, including timing and venue, will be set out when the annual report is issued on 17 March.

AuM
Assets under management stood at a SFr497 billion, up 16 per cent, driven by net new money of SFr14 billion, rising stock markets, and a weaker Swiss franc, it said in a statement yesterday.

Capitalisation is “solid,” it said: The Common Equity Tier 1 ratio was 17.8 per cent at the end of 2024, up from 14.6 per cent. The leverage ratio was stable, at 4.9 per cent.

“Given its high-quality client portfolio and excellent people, as well as its strong and resilient brand and unique dedication to wealth management, I believe Julius Baer has the strong foundation and all the ingredients to succeed,” Bollinger said. “This is reaffirmed by the results we are communicating today – an outcome that could not have been taken for granted a year ago. I would like to commend my colleagues for their work. Building on Julius Baer’s historic strengths, this represents a solid starting point to address the challenges we have on both the revenue and cost side.”

Inflows
Net new money inflows rose SFr14.2 billion (3.3 per cent growth rate), a year-on-year increase of 14 per cent, with net contributions from clients domiciled in strategic key markets in Europe (especially the UK, Germany, and Switzerland), Asia (particularly Singapore, Hong Kong, and India), and the Middle East (especially the UAE). Deleveraging by clients came to a halt towards the end of the year, it said. 

In 2024, operating income rose by 19 per cent (SFr621 million) to SFr3.861 billion. However, the operating income in the preceding year (2023) was hit by a large rise in specific loss allowances against the single largest exposure in the group’s private debt loan book, resulting in net credit losses of SFr586 million. When the credit loss is taken out, the underlying year-on-year increase in operating income was 1 per cent.

Net commission and fee income rose by 14 per cent to SFr2.204 billion. Recurring income (the sum of advisory and management fees and commission and fee income on other services) rose by 10 per cent, resulting in a 1 basis point widening in the recurring fee gross margin to 37 bps. 

Net income from financial instruments measured at FVTPL grew by 21 per cent to SFr1.282 billion. Treasury swap income benefited mainly from a rise in average differentials between (mainly) US and Swiss interest rates, as the Swiss National Bank started reducing rates before the US Federal Reserve did. At the same time, trading income was supported by an increase in client activity mainly around structured products.

Julius Baer said its net interest income declined by 55 per cent to SFr377 million.

Brazil
The bank said it expected to close its sale of Julius Baer Brazil in the first quarter of 2025. On 7 January, the firm said it had signed a deal to sell its domestic Brazilian wealth management business, Julius Baer Brazil, to Banco BTG Pactual. Julius Baer will continue to service Brazilian clients from other locations and, as such, the Brazil International business remains unaffected. 

Julius Baer will present a strategy update, including new medium-term targets, ahead of summer 2025. More details, including exact timing and venue, are expected to be communicated together with the publication of the Annual Report 2024 on 17 March 2025.

(Editor's note: Judging by the reactions of the market yesterday, investors aren't yet convinced that one of Switzerland's largest financial firms –a standalone private bank – has done enough yet to revive its fortunes. The new CEO knows he must deliver. The losses sustained in 2023, leading to the ouster of his predecessor, came at a bad time for a country that already saw the demise of Credit Suisse, leaving the nation with one universal bank. For the sake of the banking sector as a whole, as well as anyone else, it is to be hoped that the Julius Baer programme of efficiency bears fruit.)