Julius Baer focuses on costs as CEO sets ‘realistic’ goals

JULIUS Baer is stepping up its efforts on cost cutting while setting ‘realistic’ performance targets, as chief executive officer Stefan Bollinger seeks to move past a string of legacy issues.

The Zurich-based wealth manager will seek 130 million Swiss francs (S$205 million) in cost reductions to 2028, according to a statement ahead of an investor day on Tuesday (Jun 3), while introducing a less ambitious efficiency goal.

Bollinger and new chairman Noel Quinn are seeking to put the bank on a path for growth after 2023 losses linked to the Benko real estate collapse. Yet the bank is struggling to put the previous era behind it, amid restructuring and a continued drip feed of bad news.

The firm scrapped medium-term targets for profitability, and instead introduced a goal for net new money, a key metric for wealth managers. The bank aims to improve the measure by 4 to 5 per cent over the next three years.

In May the bank booked another large loss from property developments it helped finance. The 130 million Swiss francs loan-loss charge related to its private debt business and selected positions in its mortgage operation.

“Baer has reported an underwhelming strategy update as net new money and cost income ratio targets fail to excite relative to expectations,” analysts including Thomas Hallett at KBW wrote in a note.

In the same month Julius Baer disclosed that regulators had ordered it to hand over 4.4 million Swiss francs because of alleged failings in money-laundering controls related to transactions that had occurred between 2009 and 2019.

Baer confirmed that a share buyback programme is on hold until it has clarity over the outcome of an investigation into the Benko losses by the regulator Finma has concluded.

Anke Reingen, an analyst at RBC Capital Markets, said that the target updates “make sense” but that investors would need to see “evidence of a better outcome and buybacks to resume to see earnings growth and upgrades coming through.” BLOOMBERG