Swiss private bank EFG improved its profitability through the first nine months of the year, despite a lower base of assets under management.
EFG reported a «significant increase in underlying operating profit and underlying net profit» through the first nine months of the year, compared to the same year-ago period, the Zurich-based private bank said in a statement, while not giving specific numbers on the results.
«Despite external challenges, we have successfully executed our strategy and are on track to achieve all our targets. Our performance in the first nine months of 2022 shows that our business model can generate sustainable value throughout the economic cycle and it is a testament to our agility and resilience,» said CEO Giorgio Pradelli.
New Money
During the same period, EFG pulled in net new assets were 2.6 billion Swiss francs ($2.6 billion) which corresponds to an annualized growth of 2 percent. EFG said it reflects de-risking and deleveraging by clients across most regions due to the uncertain economic environment.
Revenue-generating assets under management (AUM) stood at 140.9 billion francs at the end of September, down from 172.0 billion at the end of last year. EFG attributed the decrease mainly to negative market performance and the previously announced divestment of the Spanish private bank A&G accounting for 12 billion francs of AUM. The «solid» net new assets had some offsetting effect, EFG said.
Increased Profitability
EFG said it generated further operating leverage during the first three quarters, resulting in a significant increase in underlying net profit. At the same time, underlying operating income increased, the result of significantly higher net interest income from interest rate increases across currencies and a rise in other income.
Partially offsetting that was lower net banking fee and commission income mainly due to the lower revenue-generating AUM and lower client activity. Operating expenses were stable compared to the prior-year period and the cost/income ratio improved further to a run rate of approximately 75%, within the 2022 target range.
Strategic Plan 2025
EFG outlined its strategic plans for the next three years through 2025 where it will target average annual net new asset growth of 4 to 6 percent over the period. That is unchanged from the goals of its 2022 plan as in the revenue margin of 85 percent.
It seeks to reduce its cost/income ratio to 69 percent from the 2019-2022 target of 72 to 75 percent and achieve a return on tangible equity of 15 to 18 percent. The target of the 2022 plan was above 15 percent.
In a challenging macro environment, EFG said it is well on track to achieve its financial targets by the end of the year and enters its 2023-2025 strategic cycle «from a position of strength». It seeks to build on what it says is a strong talent base, a scalable global platform, and a resilient and capital-light business model.
Share Buybacks
Earlier this year EFG announced a share repurchase program via open market transactions with the purpose of funding employee incentive plans. To date, the firm acquired 4.6 million of its shares and intends to repurchase up to 3.4 million additional shares through the end of the year.
