The private bank made intense efforts to hire staff last year, finding many at now collapsed Credit Suisse. This year's focus will be on integrating them despite the headwinds it sees on several fronts, senior managing partner Hubert Keller tells finews.asia.
«We felt the same trends that our peers did in 2023», Hubert Keller of Lombard Odier told finews.asia. The senior managing partner, albeit a first among equals in the Geneva-based private banking partnership, discusses the various factors driving last year's performance. On the positive side – a tailwind from higher central bank rates that drove up interest income margins.
Different Sides
Strong headwinds, on the other hand, came from the strength of the franc against major currencies, cutting into overseas revenues and pressuring volumes. Clients also withdrew money from actively managed financial investment products and put them into money markets and cash. That effect was particularly pronounced in the Lombard Investment Managers (LOIM) fund business, something that even led to outflows of assets.
The higher interest rates also made mortgages and Lombard lending more expensive in the private banking business, prompting many clients to cut debt levels on their balance sheets, impacting invested assets.
Stagnating AuM
In that context, the major Swiss wealth manager's annual 2023 performance released Thursday was a mixed bag. Net profit fell 9 percent to 221 million Swiss francs ($250 million). At the end of the year, total client assets were 296 billion francs, of which 103 billion francs were deposits, and 193 billion francs were classified as assets under management. Below the line, that was 1 billion francs more than it was a year earlier.
The strong franc ate much of the market performance last year (see graphic below) and the inflow of net new money also was barely 1 billion francs.
Second Consecutive Decline
That was the second consecutive decline in profit after 2022 although one positive aspect is that the bank managed to keep the level of AuM up. Still, it is a sharp contrast to an institution's presence in the job market, where it appears to be in the middle of a strong expansion effort given the poaching of Credit Suisse bankers.
As Keller maintains, however, only a small percentage of the new hires come from the bank, which was forcibly rescued at government prompting by UBS in March a year ago. The institution has made a total of 183 hires in its various divisions and about 60 of them were client-facing staff in private banking. The total group headcount, in contrast, is about 2,900 people.
Revived Strength
The expansion in personnel was likely a significant investment, but one that the bank did not quantify on Thursday. In Keller's eyes, the hiring was worth it and matched its strategy to grow by organic or internal means by picking off talented individuals and teams.
The level of assets brought in by new clients was at record levels last year and was at the upper end of the targeted private banking range of growth in net new money of between 3 and 5 percent.
The Privilege of Having a Long-term Focus
«We have the privilege of being a privately held investment company able to act for the long-term», Keller explained.
Still, Lombard Odier won't be quite as aggressive on the hiring front in the coming months as it was in 2023. «We will concentrate on integrating our new employees in 2024.»
Charting a Sustainable Course
Another area where Lombard Odier intends to keep a steady course is sustainability. As an investable sector, it has suffered significantly in recent years. Part of that was due to strong increases in the price of fossil fuels that prompted strong book gains in listed petroleum and natural gas companies.
Keller remains convinced that there is enormous potential in the global shift to a more climate-friendly economy, something that markets still dramatically underestimate.
He is an asset management expert himself and he sees the institution continuing to help clients navigate the potential in that area. «We are an investment house and that is one of our investment convictions and we are keeping to that», the senior managing partners emphasizes succinctly.
