Julius Baer's push to sign up relationship managers is key to its continued growth, according to leading European equity manager Michael Clements.
In a low yield environment where banks are struggling to deliver positive returns, Julius Baer has posted positive half-year results.
The firm revealed it had a 4% increase in assets under management reaching CHF 311 billion. This outcome was supported by the acquisition of a majority stake in a CHF 8.6 billion Kairos Investment Management.
The results were released shortly after the banking group announced its restructuring, which will see its investment solutions division and major country departments taking a different shape.
Head of European equity, and the fund manager of all three strategies, Michael Clements thinks Julius Baer appears to be relatively well positioned in comparison to other names in a troubled banking sector.
He said that hiring activity of the banking group is an aspect which stands out. ‘JB expects to sign up more than 200 new relationship managers this year which marks its fastest period of organic growth, and a shift away from the M&A led growth of recent years,’ he said.
He added that the banking group is making the most of the opportunity to hire from other struggling banks, including a number of their competitors in Asia.
‘This does come at a cost given the lag it takes for new RMs to rebuild their customer book. However, this bodes well for the continued growth of JB in the coming years’
However analysts at Luzerner Kantonalbank evaluated the stock as neutral rather than attractive.
Their analysis of Julius Baer said the development of the group’s capitalization was somewhat disappointing, which was due to its acquisition policy.
It stated that the acquisition of activities of Commerzbank in Luxembourg would strain Julius Baer's Tier 1 common capital ratio, which is a measurement of the bank’s core equity capital compared to its total risk-weighted assets.
LUKB noted that it remains to be seen if the increased number of relationship managers in Singapore, Monaco and Switzerland will generate enough growth in order to quickly fill in the gap in Julius Baer’s capitalization.
However, the analyses concluded that Julius Baer stays on track to benefit from consolidation of asset managers.