Can the Latsis-owned Swiss private bank put several tumultuous years behind? CEO Giorgio Pradelli has a plan but investors are skeptical.
EFG International's CEO Giorgio Pradelli (pictured below) had his hands full explaining the series of one-time charges which ate into the Swiss private bank's first-half profits (click here to read more). Vestiges of past deals including 2015's acquisition of rival Banca della Svizzera Italiana, or BSI, which turned out to be knee-deep in the 1MDB scandal, continue to hinder the bank.
Clearly, EFG hasn't quite turned the corner yet. Pradelli's plan: expand in Asia, the U.K., Italy, Portugal, and within the lucrative external asset management segment in Switzerland
«The last mile still lies ahead,» the CEO of 19 months said at a press briefing on Wednesday in Zurich. Pradelli faces the thankless task of enthusing investors he can make good on his turnaround plan. On Wednesday, the stock dropped more 8 percent.
Asian Losses
His biggest worry is Asia, where clients pulled $500 million. Pradelli told finews.com the withdrawals were due to trade tensions between the U.S. and China. «Many clients ramped down their most risky investments due to the uncertainty, and traded a lot less and also massively reduced their loans in order to 'deleverage' their trades.»
The bank was loss-making in Asia and suffered notable withdrawals in Latin America as well. Pradelli's response is to ratchet up hiring aggressively, as finews.com reported earlier on Wednesday. He wants to keep pace with the 94 new bankers EFG either hired, signed or approved to recruit in the first half.
Organic vs Acquisitions
The new joiners are expected to quickly carry their own weight (the bank operates on a distinctive model which effectively treats each adviser like a profit-and-loss center): «We have to lift our profitability per adviser as soon as possible,» Pradelli urged.
After acquiring Shaw and Partners in Australia four months ago, EFG is keen to keep growing by acquisition – particularly as its capital ratio of 21 percent means it is on very solid financial footing. However, Pradelli said he is focused on organic growth and the hiring drive. He pointed to initial fruits of success in the U.K. and continental Europe.
Swiss Promise
The bank also wants to put more elbow grease into its home market, where Pradelli – like successor Joachim Straehle – sees enormous leverage from integrating BSI. He also has high hopes for a multi-custody platform for independent asset managers set to go online in September.
EFG's last mile is to win net new money of at least 4 percent every year and lower its cost-income ratio below 75 percent. The bank hit the first metric in the second quarter, according to Pradelli. At 85.2 percent on the second, he still has several miles to go.
