Julius Baer Profit Rises on Low Credit Crisis Exposure


Swiss private bank Julius Baer beat expectations with a 31 percent rise in its 2007 net profit, saying its lack of exposure to the credit crisis was drawing in clients.

Financial market turmoil also created opportunities for Baer -- itself often mentioned as a takeover target -- to scoop up units shed by rivals and live up to its promise of being a market consolidator in Switzerland, it said on Friday.

"We do believe that this market might throw off opportunities (for acquisitions)," Chief Executive Officer Hans de Gier told journalists on a conference call.

"Nothing concrete has presented itself, but if turmoil continues some people might be tempted to part with their private banking business," he said.

Traders welcomed the results and Baer shares closed 2.9 percent higher Friday.

"Net new money is very good and the cost trends are phenomenal given the tough markets," a dealer said.

Net profit was 1.137 billion Swiss francs ($1.04 billion) in 2007, Baer said, beating the average forecast of 976 million francs in a Reuters poll of 11 analysts.

The company is restructuring after the purchase of three private banks and a hedge fund from UBS late in 2005, tapping into emerging markets in Asia and in the Middle East, where the number of millionaires is booming.

Cash Flows In

Net new money inflows into the private banking unit -- a key indicator of future income -- were 18 billion francs, while overall assets under management rose to 405 billion francs.

Julius Baer Profit Rises

"Growth markets, Asia in particular, again showed strong inflows while the core markets also contributed positively," the bank said in a statement.

Analysts have expressed concern choppy stock markets could drag down Baer's future income. But Baer said it was a good sign it had managed to keep assets under management flat in the second half of the year despite dire stock markets.

Baer, which competes with large rivals such as UBS and Credit Suisse as well as with a host of smaller peers, also set new financial targets for its business units.

Net new money flows into its private banking unit should be at least 6 percent of assets under management by 2010. The old target for 2008 was of flows of 3 to 5 percent.

At more than 15 times expected 2008 earnings, Baer shares are trading well above the eight times multiple of both Credit Suisse and UBS, whose investment banks have been hit by the subprime crisis.