Julius Baer Group assets under management ended the first six months of 2019 at CHF 412 billion, an increase of CHF 30 billion, or 8%, since the end of 2018.
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The growth in AuM was helped by a strong recovery in global stock markets, as well as net new money of CHF 6.2 billion and the first-time consolidation of NSC Asesores in Mexico, which added CHF 3 billion.
The strengthening Swiss franc had a slightly negative impact on AuM.
While the annualised net new money growth rate7 of 3.2% was below the Group’s medium-term target range (4–6%), it moved closer to the target in the last quarter.
Excluding Kairos, net inflows developed at a satisfactory level inside the targeted range, driven by solid inflows from clients domiciled in Asia, Europe, and the Middle East.
However, these net inflows were partly offset by net outflows from Kairos funds (following a decline in fund performance in 2018; in H1 2019 the performance improved again).
The Group’s net new money was also negatively impacted to some extent by a limited number of client exits in the context of the ongoing client risk review project (which is nearing completion), as well as by modest outflows following a wider application of negative interest rates to large cash holdings in affected currencies, mainly Swiss francs and euros.
Including assets under custody2 of CHF 67 billion, total client assets2 grew by 8% from year-end 2018 to CHF 479 billion.
Operating income was CHF 1,699 million, a decrease of 5% versus H1 2018.
Compared to the second half of 2018, operating income grew by 8%.
As monthly average AuM increased to CHF 408 billion (up 4% year-on-year and 3% versus H2 2018), the gross margin came to 83.2 bp, a decline versus H1 2018 (91.5 bp), but an improvement from H2 2018 (79.6 bp).
Net commission and fee income decreased by 6% year-on-year to CHF 956 million.
This decline was driven mainly by lower client transaction activity compared to the first half of 2018, and to a lesser extent by modest fee pressure on discretionary mandates and a lower contribution from Kairos.
Net interest and dividend income declined by 7% year-on-year to CHF 515 million.
It included CHF 162 million of dividend income on trading portfolios, up 2% year-on-year.
Excluding this item, underlying net interest and dividend income decreased by 10% to CHF 354 million.
Underlying net interest income benefitted from an increase in interest income on loans (driven by higher US interest rates) and interest income on debt instruments at FVOCI8 (following an increase in investments of excess deposits into the Group’s treasury portfolio, at higher rates).
However, this benefit was more than offset by an increase in interest expense on amounts due to customers.
Net trading income decreased by 4% year-on-year to CHF 197 million.
Including the dividend income related to trading portfolios, underlying net trading income declined by 2% to CHF 359 million.
Other ordinary results (which, among other items, includes income from associates, rental income, and net gains/losses from the disposal of investments from the financial assets portfolio) grew by CHF 14 million year-on-year to CHF 28 million.
Net credit recoveries on financial assets improved from close to zero in H1 2018 to CHF 3 million. ■