Julius Baer sees net money slowdown in 2018, on lookout for acquisitions

Julius Baer sees net money slowdown in 2018, on lookout for acquisitions

Arnd Wiegmann

ZURICH (Reuters) - Swiss private bank Julius Baer does not expect to keep pace with last year's bumper growth in 2018 and will push ahead with hiring more client managers and looking for deals under its new chief executive.

After a hiring spree helped the bank gain new clients and bring in 22 billion Swiss francs ($23.6 billion) in fresh funds last year, Chief Executive Bernhard Hodler said on Wednesday that the bank was unlikely to overshoot its target again.

"With regard to net new money, 2017 was a bit special," Hodler told journalists and analysts. "2018 will be a good year overall, also with regard to net new money, but our estimate is to be within the range of 4-6 percent (growth)."

Switzerland's third-largest listed bank earlier posted a 14 percent rise in 2017 net profit to 705 million francs under IFRS accounting standards.

Over 100 net hires in 2016 and 41 in 2017 helped Baer achieve 6.6 percent growth last year in net new money, an indicator of future earnings in private banking. That overshot the group's 4-6 percent mid-term target range.

However, internal transfers meant the bank increased its total number of relationship managers by only 13 in 2017, dampening prospects for similar inflows this year.

It aims to hire a net 80 relationship managers this year.

Julius Baer is looking at both large and small acquisitions, bank executives said, adding Baer could consider a transformative deal like the 2013 takeover of Merrill Lynch's international wealth management business for 883 million francs.

The bank could self-finance mid-sized deals from the strength of its own balance sheet, Chief Financial Officer Dieter Enkelmann said.

Hodler, speaking at the bank's first major corporate event since taking the helm in November, said he would drive forward the bank's growth strategy. Hodler, formerly the bank's chief risk officer, took over when long-time boss Boris Collardi quit to join independent wealth manager Pictet.

"It's a great strategy we will sharpen in a year to come and will have three strategic priorities," Hodler said, citing increasing business with existing clients and doubling down on existing markets as part of its focus. "And thirdly, drive our proven growth strategy of organic development and targeted M&A."

Shares were down 1.5 percent by mid-day after results failed to wow investors to an already highly priced stock. Shares trade at nearly 23 times earnings and have gained over a third in value over the past year.

"We believe it will be difficult for the bank to sustain the strong net new asset growth, which is likely to abate toward 5 percent," Baader Helvea analyst Tomasz Grzelak said in a note.

The group proposed raising its dividend to 1.40 francs per share from 1.20.

($1 = 0.9322 Swiss francs)

(Reporting by Brenna Hughes Neghaiwi; Editing by Mark Potter and Adrian Croft)