At the end of April 2015, Julius Baer Group's assets under management (AuM) amounted to CHF 289 billion, a decrease since the end of 2014 of just CHF 2 billion, or 1%, despite the very significant strengthening of the Swiss franc.
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In the year-to-date development of Group AuM, the positive contributions from continued net new money, market performance and the transfer in March 2015 of CHF 4.3 billion from Leumi Private Bank AG were offset by a CHF 19 billion negative currency impact following the significant strengthening of the Swiss franc against almost all currencies so far this year.
Partly impacted by the currency translation effect and the ongoing regularisation of legacy assets in France and Italy, net inflows were, on an annualised basis, at the low end of the 4-6% medium-term target range.
The gross margin benefitted from robust client activity in the first four months and advanced to a level moderately above 100 basis points (bps). The boost in client engagement was driven by higher market volatility and was evident in many areas, including increased volumes in structured products, an upturn in equity and fixed income transactions, a rise in foreign exchange activity, as well as a repositioning by Asian investors in March and April 2015.
The increases in volatility and volumes were more pronounced in the period immediately following the Swiss National Bank's decision on 15 January 2015 to discontinue the minimum exchange rate of CHF 1.20 per euro, leading to an exceptionally high gross margin in January 2015. In the period February-April 2015, the gross margin was moderately below 100 bps.
The cost/income ratio improved to a level just below the 65-70% medium-term target range. This improvement was driven strongly by the aforementioned increase in the gross margin as well as by the full benefits coming through from the cost synergy realisation in 2014 in relation to the integration of Merrill Lynch's International Wealth Management business (IWM) outside the US.
In the period February-April 2015, the cost/income ratio was slightly above the lower end of the target range. The Group continues with the implementation of the cost measures announced last February, the benefits of which are expected to start building up gradually in the remainder of the year.
Valuation allowances, provisions and losses were, on a pro-rata basis (four months), at approximately the same level as in the second half of 2014.
As a result, the pre-tax profit margin improved to close to the top end of the 30-35 bps medium-term target range. In the period February-April 2015, the pre-tax-profit margin was in the middle of this range.
Julius Baer remains strongly capitalised. At the end of April 2015, the Group's BIS total capital ratio stood at 22.4% and the BIS tier 1 ratio at 21.1%, well above the targeted floors of 15% and 12%, respectively. ■