Julius Baer reported a 25% drop in net profit for 2023, as the Swiss wealth manager's new risk framework and loan impairments continued to weigh on earnings. The bank posted a net profit of 454 million Swiss francs ($502 million) for the full year, down from 605 million francs in 2022, missing analysts' expectations of 495 million francs.
Impact of New Risk Framework
The decline was driven by higher loan loss provisions and costs related to the implementation of a new risk framework, which the bank introduced in response to the collapse of Credit Suisse. Julius Baer set aside 102 million francs for loan impairments, up from 56 million francs a year earlier, and booked 47 million francs in restructuring expenses.
“Our new risk framework has been implemented as planned, and we are now seeing the impact on our financials,” said Chief Executive Officer Philipp Rickenbacher in a statement. “While this has weighed on short-term profitability, it positions us well for sustainable growth.”
Assets Under Management Grow
Despite the profit decline, Julius Baer saw assets under management rise 3% to 427 billion francs, driven by net new money inflows of 10.5 billion francs. The bank also reported a cost/income ratio of 73.5%, up from 68.6% in 2022, reflecting higher costs.
The wealth manager's performance was also affected by a challenging market environment, with geopolitical tensions and high inflation impacting client activity. The bank's net interest income fell 12% to 1.1 billion francs, while commission and fee income rose 4% to 2.3 billion francs.
Outlook and Strategy
Julius Baer said it expects the new risk framework to continue to weigh on earnings in the first half of 2024, but anticipates a gradual improvement in the second half. The bank plans to focus on cost discipline and investment in technology to drive efficiency.
“We are confident that our strategy will deliver long-term value for shareholders,” Rickenbacher said. The bank proposed a dividend of 2.60 francs per share, down from 3.00 francs a year earlier.
