Julius Bär Gruppe AG ($BAER)

Ladies and gentlemen, welcome to the Julius Bar Analyst Q&A on Interim Management Statement for the first 4 months of 2026. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Alexander van Leeuwen, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining today's Q&A session with CEO, Stefan Bollinger; and CFO, Evie Kostakis. The reference documents for this call is the Interim Management Statement or IMS, covering the first 4 months of 2026 issued earlier this morning as a media release. As noted in the release, the IMS is prepared on the basis of unaudited management accounts and present financial information using non-IFRS alternative performance measures or APMs. In that context, we also refer you to the APM section at the end of the release. The customary cautionary statement is also included there and applies equally to the remarks made during this call. We aim to conclude the session by 9:00 Swiss time. With that in mind, we kindly ask participants to limit themselves to a maximum of 2 questions each. With that, it is my pleasure to hand over to Stefan.

Thank you, Alex, and good morning, everyone. Today, we reported the best start of the year -- to the year in Julius Bar's history with record operating income driven by all-time high assets under management and exceptional client activity. This overall strong performance is a testament to the strength of our franchise and the quality of our people. It is precisely in challenging times like this that Julius Bar demonstrates its ability to navigate complexity, seize opportunities and delivers value, both for our clients and shareholders. I want to take a moment to say that I'm particularly proud of our teams, who have been directly affected by the war in the Middle East. They have demonstrated extraordinary resilience in dealing with multiple challenges, all while delivering the highest level of service to our clients. Looking at our top line performance, we reported that assets under management reached a record CHF 528 billion, driven by strong equity market performance and net new money inflows of CHF 3 billion. The annualized net new money pace of 1.7% reflects a slower start to the year due to 3 factors: First, the continued implementation of our revised risk and compliance framework; second, the heightened uncertainty linked to the ongoing conflict in the Middle East; and third, a pause in client releveraging. We also announced the appointment of Thomas Frauenlob and Rajesh Manwani to our Executive Board. Thomas is Co-Head, Region Western Markets in Switzerland, based in Zurich; and Rajesh Manwani, Co-Head, Global Products & Solutions, is based in Singapore. This change further strengthens our EXP, balancing group functions with region and product representation and reflects the group's pivot to growth. In terms of outlook, the strong performance in the opening months supported by the absence of significant one-off effects positions us to deliver an IFRS net profit for the first half of 2026 that is substantially higher than in the first half of 2025. Furthermore, we are making good progress on executing the strategic priorities we outlined to you last June in London with all our 5 programs up and running. As a result, we are on track to deliver on our midterm goals, including our net new money target of 4% to 5% by 2028. Finally, to address it upfront, as of today, we don't have an update on the status of FINMA's enforcement action. However, we continue to have a transparent and constructive dialogue with our regulator. Let me now take this opportunity to personally thank Evie, our outgoing CFO, for her many contributions to Julius Bar. Evie's leadership has been crucial in repositioning Julius Bar for long-term success, and I personally greatly appreciate her support and guidance since I joined the bank. She will stay with us until the end of the year to ensure an orderly transition. With that, over to you, Evie, for an update on our results.

Thank you, Stefan, for your kind words, and good morning, everyone. It's been an honor to work by your side and under your leadership. Julius Bar is an amazing company, and I fully intend to remain a proud shareholder and a loyal client. But first things first, I will ensure my successor can hit the ground running and get off to a flying start. In the first 4 months of the year, it was pleasing to see assets under management reached a record high of CHF 528 billion despite a further 1.5% appreciation of the Swiss franc against the dollar in percentage terms. Operating jaws widened substantially with the cost-to-income ratio improving to 62% and the pretax margin to 32 basis points. And the strong capital-generative nature of this business is evidenced by the capital buildup in the first 4 months of the year with the CET1 capital ratio now at 18.1%. Obviously, the results were helped by the very high activity in the first quarter when we experienced high levels of volatility. And while we have no crystal ball in our planning, we do not assume that such an exceptional activity environment will continue in the near term. Indeed, in April, the exit gross margin normalized down to 81 basis points on the back of lower activity-driven income. Together with the fact that the Swiss franc shows no signs of weakening, this means that we need to remain laser-focused on cost discipline as indeed we did in the first 4 months of the year. With that, let's now move on straight to Q&A.

[Operator Instructions] The first question comes from the line of Flora Bocahut from Barclays.

The first question is on the RM number. I don't think I saw it in the press release. I may have missed it, but you had the end-of-period number of RMs. And any comments you can give us on the performance of your relationship manager this quarter in terms of net new money with the usual breakdown, if you can, between new RMs and seasoned RMs? And then I just wanted to ask you a broader question on the cost performance. Can you maybe tell us where you stand on the savings that you target? And also if you booked any restructuring costs this quarter -- these 4 months?

Thank you very much for the questions. Let me start with the first one. In terms of the number of relationship managers, we ended April with 1,257. As we said, we've made good progress in hiring RMs in the first 4 months of the year with more than 30 already starting with us and 50 in advanced discussions. So from where we stand today, we are quite reasonably confident that we'll get near the 150 number that we target for year-end. In terms of the CHF 3 billion net new money print for the first quarter, the contribution came mostly from RMs on business case. These RMs are tracking well. We're very pleased with our performance. They constitute about 30% of the total RM population and the business case achievement rate is tracking at 68%. In terms of our efficiency program and the CHF 130 million gross savings we target for this strategic cycle, we are well on track. You've seen our cost-to-income ratio for the first 4 months of the year. Of course, that was very much embedded by a very strong gross margin. Nonetheless, we continue to be very disciplined with respect to our cost management. We haven't taken too many restructuring charges in the first 4 months of the year or made investments that offset our cost takeout. However, we expect more of that to come through in the remaining couple of quarters, and we'll give you a full-fledged update with the half year results.

The next question comes from the line of Amit Ranjan from JPMorgan.

Thanks, Evie, for all the engagement over the years. The first one is on net new money flows. How should we think about the impact of the risk and compliance framework going forward? Is it expected to continue through the year? And if you can tell us also what the impact was in the first 4 months from this? And how should we think about the slightly above 3% expectation on net new money for 2026 now? And the second one is on gross margins. So if you can please talk through the drivers of the change in mix between NII and treasury swap income. Was it related to the size of the portfolio or something else, please?

Thank you, Amit, for the question. And so on the first question around net new money, maybe just I outlined what has happened so far this year, and then we can talk about what we expect going forward. As we said in our statement, the 3 reasons are the derisking, the Middle East crisis and the modest releveraging. I mean maybe on the last point, just to clarify, this added 0.6% to net new money in H2, and it came to a halt for now. On the derisking, as we said before, derisking is an ongoing exercise. In the current year, the application of our revised risk and compliance framework is leading to more derisking than in a normal year, including on compliance and reputation risk. What I would say is sort of from a quality point of view, while this obviously does not help our flows in the short term, the key benefit is that it does lead to an improvement in the quality and long-term sustainability of the client book. I would also reiterate that we're relentlessly focused on introducing organic growth, and we can outline what the initiatives are that we're working on. And I would also like to reiterate that we're highly confident that we can reach our net new money target of 4% to 5% by 2028.

And Amit, thank you. It's also been a big pleasure to working with you throughout the years. So thank you for your comments. Let me try and address the outlook question. Look, where -- given where the slower start to the year in terms of net new money, from today's perspective, we assume that net inflows will improve for the rest of the year, but the 2026 net new money will be somewhat below the 2025 annualized growth rate. Nonetheless, as Stefan said, we are highly confident that we can reach our net new money target range of 4% to 5% by 2028. Now with respect to the second question and the dynamics around treasury swap income and net interest income, you will have seen that the treasury swap income came down to 18 basis points versus the 22 basis point print in the second half of the year. It's important to note that treasury swap income decline was largely offset by 3 basis points higher net interest income. As you know, the Federal Reserve cut rates 3x in the second half of 2025, and now that's fully reflected in the first 4 months of this year. Lower U.S. rates, ceteris paribus are good for NII, given that we have more U.S. dollar deposits than assets and negative for treasury swap income as the difference between the U.S. and Swiss rates is reduced. And of course, in case the Federal Reserve were somehow to increase rates, then obviously, the reverse would be true. This is why it is so important to look at the total interest-driven income rather than just the individual components.

We now have a question from the line of Anke Reingen from RBC.

Firstly, just on your releveraging. I thought it was somewhat surprising. Is that because of your derisking? And is this largely like an April trend you were seeing so that it's 0 for the first 4 months? And then I was wondering, can you give us an indication about your exit margin in April, please?

Anke, thanks for the couple of questions. So on the first one, there's been a pause in client releveraging in the first 4 months of the year. And with the reduced optimism around the possibility of Central Bank interest rates coming down meaningfully in the U.S., I've even heard some chatter about potential hikes and the potential rate hike in Europe being floated by ECB officials in combination with the sense of geopolitical and macroeconomic uncertainty, in our current thinking, we are not assuming any meaningful acceleration of client releveraging in the near term. You will recall that in the second half of last year, we had a 0.6 percentage points contribution of releveraging to the net new money, which we didn't see in the first 4 months of the year, but this had nothing to do with derisking. And Anke, please remind me what the second question was?

Exit margin.

Yes, the exit margin was 81 basis points in April and the delta between the 90s for the most part in activity driven.

The next question comes from the line of Ben Caven-Roberts Goldman Sachs International.

So just two, please. So on the cost-income. So in February, I think you've given guidance that assuming similar inputs to last year's strategy update, you'd expect a slightly higher cost-income in 2026 versus the 68% that you did in 2025. How do you think about that guidance now given the 4 months of the year that are now behind you? And obviously, revenue margins trending pretty solidly? And then a follow-up on net new money, please. Is there any color you'd give by geography just in terms of if there was much of a different picture in Europe versus the Middle East, versus Asia and then how clients are navigating that backdrop now?

Thanks for the questions. So on the cost-to-income ratio, the low cost-to-income ratio we achieved in the first 4 months of the year is primarily driven by the exceptionally high activity-driven income, which led to the gross margin print of 90 basis points, which is obviously well above the 80 basis points input factor that we applied in setting our medium-term cost-income ratio target. However, I referenced the exit margin in April. And for now, I think that the guidance I gave in February still makes sense, i.e., with an input factor of 80 basis points, a dollar- Swiss exchange rate at 0.8 and a reasonably normal AUM development, we would expect to get to a cost-income ratio this year that is around the levels of last year. And in terms of net new money and color on geographies, for the first 4 months of the year, we had a stronger contribution from Western Europe and Switzerland. Looking ahead, we expect more broad-based contribution from all the regions.

We now have a question from the line of Herman Nicholas from Citi.

Two for me, please. Firstly, on relationship managers. So you mentioned the 1,257 at the end of April, 30 joiners. Could you just discuss departure trends and reaction to the revised contract model now that we've had a few months of that being implemented? And then the second question I had was on the capital build, which was quite strong in the first 4 months. So just wondering if there was anything that you've done in terms of optimizing your risk-weighted assets to support that capital build or if that was just pure you can reference, please.

Nick, thanks for the questions. Let me start with the second one on the capital buildup. So we were at 17.4% at year-end. We had about a 200 basis point contribution from IFRS net profits. The treasury bond portfolio, for the most part, has pulled to par, so there was no movement there. Then you take away 80 basis points for the dividend accrual and actually RWAs increased slightly. So that gets you to the 18.1%. That's kind of a detail of the capital walk. So primarily driven by strong profits. With the respect to the second question on RMs, we don't -- as we said, we've hired quite well. We have 33 that we've signed on and 50 in advanced discussions. We've had some leavers. As you know, we're very diligent about low performer management. So we continue to do that at pace across the board. And I would not say that any leavers have anything to do with the RM comp model, which has been extremely well received by our relationship managers, but I'll let Stefan add some comments on that.

Thanks, Evie. Yes, Nick, the feedback from RMs on the new compensation framework has been positive. I mean, just to reiterate what we did, the purpose of the new RM framework is to align RM's incentive with the interest of the bank and hence, our shareholders. Give them an incentive to stay in our core wealth management lane, manage tail risk and at the same time, pay for performance. And just to maybe make it clear what I mean with pay for performance. What we did is we changed the way we define performance in a way that aligns with you, our shareholders. So, so far, there has been no negative reaction and has not been a driver of departure.

We now have a question from the line of Nicolas Payen from Kepler Cheuvreux.

I have two, please. The first one would be on RMs. If you could give us a bit of color regarding where you are hiring the most, notably the breakdown between EMEA and Asia, please? And the second one would be on investments because if I remember well, you mentioned that 2026 was an investment year. And I just wanted to see what kind of pace should we expect for 2026 throughout the year? Should we expect some lumpiness in the investments after the first 4 months?

Thanks for the question. We are hiring across the board. And I would say the obvious one where we haven't hired that much is the Middle East as clearly RMs are focusing on other things for now. Otherwise, we have been successful hiring across the board. And I would highlight, in particular, our focus on beefing up our RM population in Switzerland. And we see some great talent there in the market.

And on the investment side, Nicolas, I wouldn't talk about any lumpiness in our investment cycle. You know that we are investing in our core infrastructure in Switzerland. That's a multiyear program. And of course, we continue to invest in other areas of technology to augment our relationship managers as well as investments in...

Ladies and gentlemen, please hold the line. The connection with the speakers has been lost. Mr. Payen, your line is open. You may go ahead with your questions.

I think it was. just answered.

[Operator Instructions] The next question comes from the line of Giulia Miotto from Morgan Stanley.

I have two. So first of all, I'm going to go back on the net new money. How long do you envisage the revised risk and compliance framework to continue to be a headwind? Because I would think by now, basically, I would guess user should have reviewed all the client book and this should come to an end. I hear that you said net new money in '26 is perhaps slightly below '25, so below 2.9%. But I was wondering if we can basically see the end of this by midyear or if you think it continues until the end of the year. And then on cost-income. So I was surprised that you basically reiterated the same guidance as you gave in February because the first 4 months has been incredibly strong. And so unless -- and the exit rate on gross margin is 81 bps. So unless we see an increase in costs, and meaningful increase in cost, cost-income should be better. What am I missing?

Giulia, let me start with the second question. So indeed, on the cost-to-income ratio, we haven't seen too much of cost to achieve in the first 4 months of the year in terms of the CHF 130 million efficiency program. So we expect some cost increase in the second half of the year, and that also informs our guidance at 80 basis points -- sorry, at an 80 basis points gross margin input. The other point also to take note of is we did assume that this guidance was with a spot CHF 0.8 dollar exchange rate, and we've been slightly stronger than in terms of the Swiss franc versus the dollar for the first 4 months of the year, and we don't expect that the Swiss franc is going to weaken in the next few months.

And Giulia, on your questions on the derisking and how long it takes, I mean, just to reiterate, this is an ongoing exercise. And as you pointed out, in the current year, it's somewhat more than what we expected. As we mentioned before, you should expect a gradual uptick in net new money over time. But being now some months into 2026, it's too early to give you further guidance. I just want to reiterate again that we are highly confident that we can reach our net new money target of 4% to 5% by 2028. And we are very focused on generating sustainable, high-quality growth in net new money and of course, also in revenues. And as you know, we are laser-focused on improving organic growth. We launched this initiative at the beginning of the year, and we are very focused on increasing our product and service capabilities, have a sharper client targeting and really enable the front line to deliver with initiatives such as ease of doing business. And of course Sorry, Giulia, just another component, of course, is also that we really want to empower our seasoned RMs to be an additional growth engine, complementing the hiring of experienced RMs, and we start to see some progress on that.

We now have a question from the line of Jeremy Sigee from BNP.

I wanted to carry on the same discussion actually about adviser hires and net new money. So apologies for being repetitive. But the -- on the advisers, I think at the full year in February or January, February, you were telling us that you did expect the attrition that you've seen, but net-net, a small positive increase in advisers over the full year. Here, you've obviously seen a slight decrease in net terms. But is the expectation for a small positive increase in advisers over the full year? Is that still intact? And then secondly, just again, circling back on the net new money, now expecting slightly less than 2025. I think at full year, you were expecting a slight improvement versus 2025. I just wondered how you'd characterize what's turning out differently or what's proving a bit more difficult than you were hoping?

Jeremy, so thanks for the questions. On the adviser hires, we still expect a small net positive increase for the end of the year. That remains unchanged. The only thing that sort of changed is the situation in the Middle East. So certain discussions, advanced discussions we had with RMs in that region have for obvious reasons, stalled. But nonetheless, we're still quite confident that we'll see a small net increase for -- by the end of the year. And with respect to what's changed, well, what's changed was the slow start in the first 4 months of the year in terms of net new money, which makes us adjust slightly our guidance.

And actually, just since you mentioned Middle East, I mean, how do you view the net impact of that in net new money terms? I mean, obviously, it's a massive disruption, but do you get a kind of flight to safety benefit as well from that going on?

Yes. Look, just to remind everyone, our AUM exposure in the Middle East is about 11%. It's unchanged from the end of 2025. And what I would say is that the client segment that we are operating in, which is the wealthiest family, they have booked their assets offshore since a long time, Singapore and Switzerland being the most popular booking centers. So we actually don't see this shift from onshore to offshore. I mean also to remind you, we actually don't have a booking center in the Middle East. And so I think what has been talked about in the press, it might be more something in the lower segments. We did see some flows, but maybe not as much as you would have expected because, of course, these families also were focusing on their personal situations, the operating business and other things. I would say midterm, however, this has really highlighted the value of a stable offshore booking center. So I think this was a period where people reflected again on the value of having their money in places like Switzerland with safety and stability.

The next question comes from the line of Stefan Stalmann from Autonomous Research.

My first question is going back to net new assets and -- sorry, net new money and the derisking effect. Are you actively exiting existing clients or existing client groups? Or are you merely tightening the onboarding criteria for new clients? And the second question I wanted to ask also on net new money. You suggested Evie, that most of the net new money is still coming from RMs on business plans. So effectively very little net new money from the seasoned RMs. And I find it a little surprising given that the new compensation system is now in place and well supported from what you say. Why is it that there's no movement on the organic growth of the seasoned portfolios?

Stefan, let me start with the second question. So I said most of the net new money came from RMs and business case, and we're very pleased with the developments on that front with the business case achievement rate of 68%. The split was around 70-30. So 70% from RMs -- 70% from our RMs on business case and 30% from existing RMs. So I didn't mean to underplay the contribution of existing RMs. That being said, over the long term, we want to increase that percentage, and Stefan has talked extensively about all the initiatives underway in order to get our seasoned RMs to a place where they're very systematic contributors to our growth.

And to your question around the clients, of course, we apply our group risk and compliance framework to both existing and new clients. So both are affected.

We now have a question from the line of Lam Hubert from Bank of America.

It's Hubert Lam from Bank of America. I've got 2 questions. Firstly -- well, firstly, I'd like to thank Evie for all our hard work over the last few years. Good luck in the future. Now on to the questions. Firstly, on flows, Evie, when you talked about the geographic mix and where the flows are mainly coming from, you mentioned Western Europe and Switzerland, but you did mention Asia. Can you talk about what the flows you're seeing coming from Asia and the competition you're seeing there as a lot of the competitors have reported good inflows in the region. Second question is if you can give us an update on progress on the Swiss IT platform. How is that coming along and the timing for that in terms of progress?

Thank you, Hubert, for the question. Maybe I'll start with the first one. And of course, when we talk about Asia, most people talk about the IPO boom we have seen in Hong Kong last summer and I would just remind you of how the life cycle of IPO proceeds work. Obviously, there's an IPO, then there's a lockup that has to expire, then there's a single stock risk management transaction. The clients get cash and then they do the deployment. And naturally, we are most interested in the fifth leg when clients actually put money to work and we can develop a wealth management relationship and maybe universal banks that are looking for cash to finance their other banking activities like commercial banking, they're going to be a little bit earlier in that game, but I think we are very well positioned to take advantage of that. And I would say, right now, as you know, with markets at all-time high, to deploy cash into -- particularly into the equities market is obviously something that some clients are not keen to do. And therefore, maybe we don't see the deployment happen as fast as you would have expected otherwise.

And Hubert, this is Evie. Thanks a lot. It's also been a pleasure to work with you over the last few years. On the IT platform project, I think what we can say is that we're making decent progress, and we're on track. I'm sure we will be updating you in coming quarters.

[Operator Instructions] We have a follow-up question from the line of Ben Caven-Roberts from Goldman Sachs International.

Just a technical follow-up on the cost-income ratio guidance for 2026 that we were just talking about. Not to put too fine a point on it, but when you mentioned the 80 bps gross margin input assumed, do you now mean for the full year or for the remainder of the year at this point? Because even if you assume 80 bps for the rest of this year, mechanically, given the 4-month print, that would imply a full year run rate about 3 bps higher versus the 80, I think you mentioned a few months back, plus, of course, AUM is tracking a bit higher year-to-date. I recognize dollar-Franc, as you say, is a bit weaker now than the 0.8%. But outside of that, does that mean that costs are now tracking a bit higher than what you had expected previously? Or there's just a bit of conservatism in the way you're talking about this?

Thanks, Ben. Thanks for putting pressure on me. No, look, the 80 basis points is for full year. I think the implication from my comments is we do expect a little bit of cost pressure coming in the second half of the year.

We now have a question from the line of Daniel Regli from ZKB.

I must admit that I've missed you the technical reasons part of the Q&A. So if anything was already answered, just skip it. The first question is on net new money. And can you quantify the kind of risk and compliance impact on the net new money number in the first 4 months in '26? And the second question is, do you have any comments on the ongoing FINMA enforcement and the time line? Is there any kind of change or update on this one?

We indeed actually already talked a bunch about net new money and what the impact was on the derisking. On the question around FINMA, as we said upfront, there's no update, but we feel that we have a very constructive and proactive relationship, and I'm very hopefully we're going to bring this to a conclusion. But the timing, of course, as you know, is the timing of the regulator. It's not up to us to determine when that's going to happen.

Okay. But you don't have any kind of indication that this will be in reasonable time?

No, we don't. We're not going to speculate what FINMA's time line is.

[Operator Instructions] We have a follow-up question from the line of Anke Reingen from RBC.

Apologies for following up. I just wanted to ask about the 80 basis points for the full year. Is that sort of like your guidance for the gross margin where you think you land? Or is that the input factor for your cost-income ratio guidance? And then just on the net new money, you reiterate your high confidence on the 4% to 5% in 2028. What is sort of like the key -- what does give you the confidence?

I'll take the first one, Anke. Thank you. It is indeed an input factor. It's not a guidance. We don't give guidance for gross margin, as you know, because we're reasonably confident about the trajectory of the recurring component of the margin. We are also reasonably comfortable with the interest-driven component of the margin, but the wildcard also always is the activity-driven component. So it's indeed an input factor and not a guidance. Stefan?

Yes. And I'm happy to take your question why we're so confident on the 2028 4% to 5% net new money target. As we've talked to you before, we have many initiatives in place that we are well on track on. I mean, on the product and service capabilities, we are doubling down on strong capabilities such as discretionary mandates and structured products. We're selectively expanding other activities, namely in alternatives on the sharper client targeting, we're strengthening our key geographies and dedicated client positions -- propositions. And in terms of front enablement, I would highlight that we spent a lot of time streamlining our processes [indiscernible] sales management to give RMs more time to serve clients, everything that we're doing under the ease of doing business umbrella. There's, of course, also some benefits from AI coming in, for example, on the compliance side, determining source of wealth and other things. And I think all these initiatives are designed to accelerate our growth and really making our seasoned RMs to deliver organic growth. And maybe just to mention an additional point on the RM compensation. One key change we made is that we're really incentivizing people to deliver growth and deliver share of wallet. And so I think we have put both the infrastructure in place for our RMs to have time to go out and find new business. At the same time, they have a financial incentive to do that.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Bollinger for any closing remarks.

Thank you all for your questions and for attending this morning. The strong performance we delivered in the first 4 months of the year is a further milestone in our ongoing strategic transformation. I look ahead with confidence. We have the right business model and the right strategy. Independence at scale resonates strongly with our clients. And this, combined with the disciplined execution of our strategy with a clear focus on tight risk management and organic growth positions us well to achieve our midterm targets. We look forward to speaking to you again at our half year results on the 21st of July. Thank you. Have a great day, and have a nice weekend.

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