Swiss private bank Julius Baer registered robust net new money inflows at the end of October. But markets are deteriorating and margins are down. The firm intends to reduce complexity in its organization.

At the end of October 2018, Julius Baer Group’s assets under management (AuM) stood at 395 billion francs, a year-to-date increase of six billion francs, or 2 percent, according to an interim management statement released on Tuesday.

The positive contributions to AuM from net new money growth, the acquisition (in June) of Reliance Group in Brazil, and a small positive currency impact, were largely offset by adverse market performance. Most of the negative market impact on AuM occurred in October, when many leading stock markets suffered significant corrections.

Further Client Deleveraging

Net inflows were robust and, despite further client deleveraging, remained close to 5 percent (annualised) for the first ten months, just below the mid-point of the medium-term 4 to 6 percent target range.

All regions recorded net inflows, with particularly strong contributions from clients domiciled in Asia, the U.K. and Germany.

More Cautious Stance

Clients adopted a more cautious stance on the back of the challenging market environment. As a consequence, the gross margin for the first ten months of 2018 decreased to 87 bp. This compares to 91 bp in the first six months of 2018 and 90 bp for full year 2017.

As part of its strategy to focus on core markets, the Group is now prioritising its presence, client offering and growth investments accordingly. Year-to-date investments in core markets include the opening of new offices in the U.K. (Manchester, Leeds, Edinburgh) and Germany (Hanover, Berlin) and the acquisition of Reliance Group in Brazil.

Strategic Partnerships in Asia

Julius Baer has also made targeted moves in defined growth markets, such as the strategic partnerships with Siam Commercial Bank (Thailand) and Nomura (Japan) and the recent opening of an advisory office in South Africa (Johannesburg).

At the same time, the bank has accelerated its efforts to reduce complexity and exposure in its non-core markets, including the planned closing of its offices in Panama and Peru and the discontinuation of its services to clients from selected countries.