Edited Transcript of BAER.S earnings conference call or presentation 1-Feb-21 8:30am GMT – Yahoo Finance


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Full Year 2020 Julius Baer Gruppe AG Earnings Call Feb 1, 2021 (Thomson StreetEvents) — Edited Transcript of Julius Baer Gruppe AG earnings conference call or presentation Monday, February 1, 2021 at 8: 30: 00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ Dieter Amin Enkelmann Julius Bär Gruppe AG – CFO & Member of Executive Board Philipp Rickenbacher Julius Bär Gruppe AG – CEO & Member of Executive Board ================================================================================ Conference Call Participants ================================================================================ Adam Terelak Mediobanca – Banca di credito finanziario S.p.A., Research Division – Banks Analyst Andrew Lim Societe Generale Cross Asset Research – Equity Analyst Anke Reingen RBC Capital Markets, Research Division – European Banks Analyst Daniel Regli Octavian AG, Research Division – Senior Research Analyst of Financials Daniele Brupbacher UBS Investment Bank, Research Division – MD, Banking Analyst and Head of Equities Research Switzerland Hubert Lam BofA Merrill Lynch, Research Division – VP Izabel G. Dobreva Morgan Stanley, Research Division – Equity Analyst Jeremy Charles Sigee Exane BNP Paribas, Research Division – Research Analyst Karl Jonathan Peace Crédit Suisse AG, Research Division – MD Kian Abouhossein JPMorgan Chase & Co, Research Division – MD and Head of the European Banks Equity Research Team Nicholas Herman Citigroup Inc., Research Division – VP Piers Brown HSBC, Research Division – Banks Analyst Stefan-Michael Stalmann Autonomous Research LLP – Partner, Swiss and French Banks Daniel Zulauf Patrick Winters Thomas Pohl ================================================================================ Presentation ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [1] ——————————————————————————– Ladies and gentlemen, a virtual but also very warm welcome to all of you for this presentation of the Julius Baer Full Year Results 2020. I’m hosting today’s meeting together with Dieter Enkelmann, our CFO, from the Art zone of Julius Baer’s premises here on Bahnhofstrasse in Zurich. 2020 was indeed an extraordinary year. It was a year in which, I can say, our lives changed. We had to cope with one of the biggest challenges of the past decades, the COVID pandemic. It’s a year where our way of life has really been put to the test, at least I can say that about my own. It was also an extraordinary year for Julius Baer. Our client needed us more than ever before and we had more touch points with our clients than ever before. We proved our resilience and stability with seamless service and a rock-solid balance sheet. Our wealth management business model has proven to be exactly right and proven itself under different and difficult market conditions. And I want to say a big thank you to all of our employees for doing a tremendous job and for their incredible commitment throughout this year. Despite all of these challenges, we also took a big leap forward with our strategy, our focus on sustainable profit growth and our investments in our business. 2020 was also a year of extraordinary business performance for Julius Baer. On this note, I am very glad to hand the floor to Dieter. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [2] ——————————————————————————– Thank you, Philipp, and good morning. As usual in our presentation, the results are shown on the adjusted basis, that is excluding the M&A-related items. The largest M&A-related adjustment items are listed on this Slide 6. A reconciliation is, as usual, provided in the appendix and on our website, also in the more comprehensive Alternative Performance Measures document, which also includes the definitions of adjusteds and some other KPIs. Slide 7. Of course, 2020 was an extraordinary year also for the market, and it’s worth to briefly summarize those developments that were particularly relevant for our business. The first graph shows that the stock market recovery that started after the sharp decline in February and March continued more or less uninterrupted in the second half of the year. In the second graph, we see that stock market volatility rose to exceptional high levels in March, which, in turn, drove client activity to levels we had not seen before. Volatility declined after March but overall remained more elevated than what it had seen in 2019. Central banks everywhere reacted strongly, and the U.S. interest rates dropped sharply as it’s shown in the third graph. This had ultimately a negative impact on our net interest income. A final development important to mention is that throughout this period, the U.S. dollar continued to weaken against the Swiss franc. Moving on to the results, starting with the assets under management. Assets under management grew to CHF 434 billion, an increase of CHF 8 billion or 2%, as continued positive net new money of CHF 15 billion and the positive market performance of CHF 20 billion were partly offset by a negative currency impact of CHF 25 billion. Impacted by the deep decline in March, monthly average AuM, important for the margin calculations, declined by 1% to CHF 409 billion. Including assets under custody of CHF 72 billion, total client assets rose to CHF 505 billion, the first time we crossed above the CHF 0.5 trillion mark. Slide 9. Net new money reached CHF 15 billion or 3.5% with net inflows in the second half doubling from the level in the first half. We saw solid inflows from clients domiciled in Europe and Asia. Net new money would have been higher, close to 5% without the negative impact of net outflows at Kairos and an end-of-period net reclassification from assets under management to assets under custody. Around half of net new money came from RMs who joined in the last years and around half from RMs who joined before. Slide 10. Operating income. Revenues grew by 6% or CHF 200 million to CHF 3.6 billion, driven by a strong increase in client activity in all regions and especially in Asia. This increase significantly outweighted the decline in net interest income. Commission and fee income was up 5% to over CHF 2 billion. Obviously, we saw a very significant rise in transaction-driven income, which more than offset the decline in recurring fee and commission income that followed the year-on-year decrease in average AuM as well as the lower contribution from Kairos after a year-on-year decline in client assets. Net interest income declined by 22% to CHF 622 million, following the sharp drop in U.S. interest rates. On the positive side, despite the clear rise in deposit volumes, the fall in rates led to a year-on-year decrease in deposit costs of almost CHF 300 million, thereby falling to just CHF7 million in the second half of the year, which matched the almost CHF 300 million year-on-year decrease in income on loans. However, on top of this, the year-on-year decline in U.S. interest rates also led to CHF 124 million decrease in interest income from our treasury portfolio. Net income from financial instruments, or what used to be called trading income, grew by 53% to CHF 943 million. This followed the sharp increase in market volatility, as highlighted earlier, leading to a strong increase in client activity in FX, derivatives trading and in precious metals trading and delivery and to a rise in income from an active structured products business. Other income went from CHF 50 million to just CHF 3 million, mainly as the result of a CHF 26 million year-on-year increase in credit provisioning to CHF 36 million. The CHF 49 million of net credit provisioning in H1 was followed by a net recovery of CHF 13 million in H2. Slide 11. The gross margin analysis shows clearly the effect of our client activity with the trading income gross margin increasing by 8 basis points to 23 and the transaction-driven component within commission and fee income jumping by 4 basis points to 14 bps. The recurring fee component declined by 2 basis points, mostly due to the lower contribution I mentioned earlier from Kairos. The net interest income gross margin fell by 4 basis points from the level of 2019. And in terms of the 2020 exit gross margin, based on November and December, the exit gross margin was approximately 85 basis points, of which approximately 14 basis points from net interest income. Moving on to expenses on Slide 12. Total adjusted operating expenses remained stable year-on-year at CHF 2.5 billion, but excluding the CHF 73 million DOJ provision, would have been down 3% to CHF 2.4 billion. Personnel expenses were down 1% as the increase in performance-related remuneration accruals and the increase in severance costs was more than offset by the decrease in staff levels as part of the cost reduction program. General expenses rose by 2%. However, excluding the DOJ provision, general expenses were down 9% as the rise in noncapitalized IT spend, which was accelerated in 2020 following the start of the COVID situation, was more than offset by a CHF 45 million decline in provision and losses, the nonrecurrence of last year’s spend on the client documentation project and from a decline in expenses for travel and client events in the COVID environment. Depreciation and amortization went up by 7%, reflecting the rise in IT investments in recent years. And as a result, the cost/income ratio improved to just above 66%, down from 71% in 2019. Slide 13. As a result, adjusted profit before tax improved by 22% to over CHF 1.1 billion and close to CHF 1.2 billion when excluding the DOJ provision. And the pretax margin improved by 5 bps to 27 basis points or 29 basis points when excluding the DOJ provision. Adjusted net profit grew by 24% to CHF 957 million, a new record despite the impact of the DOJ provision. And adjusted earnings per share were up 25%. IFRS net profit grew by 50% to CHF 698 million. And in the table on the lower left-hand side, you see that the return on CET1 capital improved by 5 percent points to 32%. Please note that we have slightly decreased our guidance for the adjusted tax rate, which we now believe could be around 14% for the next few years. This follows from the tax reform in the canton of Zurich and an increased contribution from lower tax jurisdictions, including our Asian platforms. Slide 14. In the last year’s strategy update, we laid out a 3-year plan to enhance revenues in order to offset the ongoing margin pressure in the industry and to improve cost efficiency. We made good progress on both topics in 2020, starting with the revenue measures. Of the targeted CHF 150 million in gross revenue improvements over 3 years, we achieved close to half, around CHF 70 million, in 2020. Of these CHF 70 million on a run rate basis, approximately 70% were already benefiting the 2020 P&L. And you can see some of the improvements areas listed on this page. Further improvements on being worked on in the next 2 years across different dimensions as also shown on this page. Moving on to the cost-saving measures. Of the targeted CHF 200 million in gross cost savings over 3 years, we achieved close to 2/3, approximately CHF 130 million in 2020. Of these CHF 130 million on a run rate basis, around half was already benefiting the P&L in 2020, mostly coming through in H2. The main reductions resulted from FTE optimizations, both in the front and the back office, from the internalization of formerly external staff, the sale of the Bahamas operations and the restructuring of our operations in Montevideo. Further improvements are planned in 2021. Last year, we indicated these measures would entail one-off restructuring costs of around CHF 60 million and that estimate remains unchanged. We used just over half in 2020 and the balance will likely mostly be used in 2021. Moving on to the balance sheet on Slide 15. Since the end of 2019, we saw the clients partially moved into cash, reflected in a 7% increase in deposits. At the same time, the loan book declined by 3%, mainly on a decrease in Lombard lending despite a recovery in H2. Both items, deposits and lending, were impacted by the decrease in the U.S. dollar exchange rate. And as a result, the loan-to-deposit ratio dropped to 61%. Moving on to capital on Slide 16. The CET1 ratio increased by almost 1 percentage points to 14.9%. CET1 capital build was CHF 0.3 billion despite CHF 163 million negative translation differences, of which about half due to the decline in the U.S. dollar and about 1/3 due to the decline in the Brazilian real and despite CHF 77 million spent on the buyback in 2020 until we were asked in March to pause it and also despite the higher dividend accrual. Risk-weighted assets went up by CHF 0.6 billion, mainly due to a CHF 0.4 billion rise in market risk-weighted assets following the year-on-year increase in market volatility. At these levels, Julius Baer continues to enjoy a very strong capital position, both in terms of absolute levels and in terms of the very thick cushion above the regulatory floor. Slide 17, on dividend and buyback. Following the significant growth in profit and the strong further build in capital, the Board proposes a dividend of CHF 1.75 per share, an increase of 17%. This represents a payout ratio of just over 40% and is, therefore, in line with our dividend policy. The share buyback we started in November 2019 and which we were asked by FINMA to pause last March is coming to an end in a few weeks. Due to the enforced pause, we only used CHF 113 million, of which, as I mentioned, CHF 77 million in 2020. We announced today to launch a new 12-month buyback program next month for an amount of up to CHF 450 million, as always, subject to market conditions. FINMA has already indicated that we can indeed start such a new program. With this, I have come to the end of my part, and I hand over back to Philipp. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [3] ——————————————————————————– Thank you very much indeed, Dieter. I will now take you through our strategic journey, through our transformation and through the achievements in 2020 and provide you with an outlook for 2021 and beyond. Let me start by reiterating the call for action for our industry that I made a year ago. The pace of change in wealth management is faster than ever and so wealth management needs to change. The COVID crisis has actually even further accelerated those trends. Let’s quickly go through them. First, client needs keep getting more complex. That’s, for example, to be seen on the investment side with the diverging speeds of recovery anticipated now in the last phase of the COVID crisis, but also with the advent of what our CIO calls state-sponsored capitalism that will affect traditional asset classes. The search for yield keeps going on and demand for private market investments are stronger than ever, associated with a strong need for advice. Second, trust and personal connections matter even more in these times of change. A U.S. study has shown that in 2020, the money velocity, the velocity at which money was flowing from one institute to another among ultra-high net worth individuals in the U.S., was 3.5x higher than prior to the crisis. But the money did not just go to new digital players. No, it actually went to established relationships the clients were trusting. Third, the quest for purpose and for meaning, and with that, the quest for sustainability has actually even deeper-ed throughout the pandemic. Sustainability has definitely become mainstream. And listening to the conversations at the World Economic Forum of the last few days where, in concentric circles, it expands from ecology to biodiversity and moves now from E to S and G sustainability is definitely here to stay and accentuated with the change to the next generation. Profit pools in our industry have been on the decline for a long time, but did so even faster in 2020, alongside, for example, the very strong decline in U.S. dollar interest rate margin. Diversifying revenue sources and finding new ways of creating value with clients in order to share that value is becoming even more imperative. And last but not least, the structural cost of doing business in financial services and in wealth management continues to rise. Swiss private banks, according to a study, had a median cost/income ratio of 80% in 2019. That was a year not distorted by the effects of the pandemic, and the need for scale is further there. The winners, I believe, firmly, will be those who recognize these trends and to act swiftly and with determination. In February 2020, as on Page 20, we have set out our new strategic plan for the next 3 years. This plan is based on our strength as a leading, focused and global wealth manager, and in a determined fashion, addressing the challenges I have just been talking about. It is built on 3 pillars: first, shifting our leadership focus from a primarily asset gathering-driven strategy to a holistic view on sustainable profit growth, taking into account assets, revenues and also costs. Second, sharpening our value proposition for our ultra-high net worth and high net worth clients, thus becoming even more relevant for our clients. And third, accelerating investments in the key pillars of our business, which are people and which is technology. I believe we executed the first leg of this 3-year strategic plan resolutely and successfully in 2020. Let me go into more detail about this. In our shift to sustainable profit growth, as shown on Page 21, we have addressed multiple dimensions: costs, revenues, but also structural and cultural elements of our business. As Dieter pointed out earlier, in 2020 we introduced the productivity program to structurally lower our cost base, to enable us to compete in the future, but also to create room for innovation and selective reinvestments. We implemented CHF 130 million of gross run rate savings. We acted swiftly, as early as February, in close collaboration with the social partners to minimize uncertainty and disruption. In parallel, and as you have already heard, we placed substantial focus on sustainable revenue measures, which yielded again a run rate contribution of roughly half of our long-term target, CHF 70 million. This included new solutions, systematic review of our client relationships, but also continued rollout of our fee-based advisory models this time in the Middle East, and more to come in 2021. Structurally, our new relationship manager compensation model is a true milestone for Julius Baer, and I dare to say, groundbreaking also for our industry. We did — we took a big step to harmonize the historically diverse models of Julius Baer. And true to our entrepreneurial DNA, the new model links pay and performance, but in a much more comprehensive way and creates value for all stakeholders. It confirms our status as employer of choice for top relationship management talent in the industry. It adds value to clients by giving them access to the whole of Julius Baer in an impartial way. It enshrines the principles of risk management through a strong weighting of the qualitative factors. And it aligns the interest of the bank with the interest of our shareholders. In 2020, we already successfully onboarded more than 60% of our relationship managers across the world, in Switzerland, in Hong Kong and Singapore and in the UAE, and we will onboard a further 25% now in ’21. And last, in the context of shifting, we also are supporting our transformation from a cultural perspective. The rollout of our code of ethics and business conduct reaffirmed and strengthened our principles of risk management, but at the same time confirmed also our client-centric approach and our business principles, which will definitely benefit our business moving forward. Serving our clients is at the core of what we do and sharpening our value proposition is about defining how we add value to them and why we are relevant to them today, but also tomorrow. We have sharpened our value proposition in at least 4 different ways in the last year through targeted regional strategies, through high-quality solutions, the use of technology and additional investments in sustainability. Let me pay — start on Page 22, by giving you some examples of our regional strategy, and bear in mind that 80% of our growth comes today from our core markets. Switzerland is our home market and largest client domicile. We enjoy exceptional brand awareness amongst Swiss high net worths and ultra-high net worth clients, but are sometimes and wrongly perceived as targeting more international clients rather than domestic ones. I believe this gives us great scope to expand our domestic client network even further and add value to entrepreneurs, to self-employed professionals, to executives or to multigenerational families, just to cite a few of our core segments. So we will invest in our home market in Switzerland based on our strategy in 2021 and beyond. Asia is our second home market, and we have been investing in Asia all along. China is a core market, which we serve successfully out of Hong Kong and Singapore. In 2020, one additional further step in developing our business was to become the first Swiss private bank to announce a partnership with the Beijing International Wealth Management Institute. This partnership will allow us to be close to the shaping emerging onshore wealth management industry in China. The investment house, Kairos, in Italy has been part of our group since 2013. As previously announced, we have completed in 2020 a restructuring program with Kairos to set it on a new path for growth. This includes co-ownership of the structure with a number of key people in asset management, a clear growth strategy and the appointment of a new CEO, Alberto Castelli. With this, Kairos is definitely ready to write now its next growth chapter in 2021. And lastly, we are also ready to refocus on growth in the Americas. After the successful sale of the Bahamas operation and with our risk-related cleanup work completed, we are now making the next targeted steps. Integration of GPS and Reliance in Brazil will provide us, under the name of Julius Baer Family Office, with new growth opportunities. And the recent hiring of a team of 6 relationship managers to focus on growth in Hispanic Americas is one more step towards growth in that region. Next to our regional focus, I believe that solutions are truly a critical element in modern wealth management to add value to our clients, as we lay out on Page 23. We give our clients access to the best solutions in the market, the best of breed, but it’s, at the same time, our outstanding in-house capabilities in areas such as investments, credit, structuring and wealth planning that enable us to truly add value to our clients, to actually drive 2 kinds of solutions, highly modular, flexible solutions almost at a fingertip; and on the other side, multidisciplinary, highly bespoke solutions to complex problems of our clients. Those latter matter most for our ultra-high net worth clients, a segment in which we have more than CHF 150 billion of assets under management. In 2020, we specifically augmented our ultra-high net worth capabilities. Two examples, our family office services. Family is in our DNA, and it requires a comprehensive toolkit to elsewhere families far beyond just investing. Key topics are family purpose, family governance, road maps, succession planning, networking. Now we have brought in 2020 all of those services together in a comprehensive suite and offering. And this will help us provide even more seamless service to our individual client families and be an even better sparring partner to their family offices. The initial demand for this has been very promising. Second, true to our belief that private markets will play an even bigger role in the future, we have step-changed our capabilities in this area and will continue to do so moving forward. Important milestones were the launch of new co-investment vehicles, but also the hiring of a direct investment team, which will provide our clients with exclusive access to institutional deal opportunities. In parallel, we have grown our secured structured and cash flow-based lending capabilities, and we will offer those opportunities within our tried and tested framework of our current risk appetite to our clients. Our advances in value proposition would be incomplete without a quick view on technology as on Page 24. At Julius Baer, we believe that technology should not replace personal contact and trust, but we can use technology to create flexibility, modularity and shortest time to market and thereby to create the most personalized solution offering for our clients. We have been doing this successfully since 2009. The Markets Toolbox, which we introduced 10 years ago, was our first modular platform. At the outset, it was real-time structuring of FX and equity structured products. It has since evolved in scope, been implemented in Asia, been complemented with a comprehensive solution for actively managed certificates, by the way, developed together with a Swiss FinTech and augmented with artificial intelligence and big data analytics. All of this should bring more value to our private and to our institutional clients and more is to be added. In Advisory, as time passed, we moved from individual solutions to truly enable advice through technology. We’ve talked before about DiAS, our digital advisory suite that supports our relationship managers to offer a highly personalized advisory experience to each individual client. It also allows to be fully regulatory compliant in complex environment, which, today, for example, in a MiFID environment, is a strong competitive advantage for Julius Baer. And finally, in 2020, we have taken these technology kits to discretionary mandates, an area, by the way, in which we had stellar investment performance. The launch of our new Mandate Solution Designer will start a new era and revolutionize the way we deliver investment expertise to our clients, again, tailored, fully modular with even better reporting and transparency. And in doing so, it will enable us also to spend more time, more quality time, of advice with our clients. This is truly how technology enables us to strengthen our relationship with our clients, and ultimately, deliver better value. Let me conclude the round on value proposition by turning the spotlight on sustainability, which truly has come of age in 2020. Julius Baer has heavily invested energy, time and resources in sustainability in the last years, both in terms of what we do as a company, but even more so in terms of enabling our clients to express their ideas via the right sustainable investment products and solutions. We take our corporate social responsibility strategy very seriously, as can be seen in the recognition we received in the MSCI ESG ranking, the SAM Corporate Sustainability Assessment, in addition to our standing in indexes like the SXI Sustainability 25 or the FTSE4Good. We have been an early signatory of the UN Principles of Responsible Investment and one of the first banks to truly sign the UN principles of responsible banking. The assessment of ESG factors is integral to our investment process and we are determined to grow the share of assets with a specific link to ESG. We want to help our clients make educated decisions. We want to give them transparency on market developments in their portfolio, and on the other side, the right tools to express their views. Our sustainability strategy is much more about — than about products though. It’s about research, the creation of networks and ecosystems, training, and as data standards evolve, ultimately also dedicated reporting. Impact investing is at the core of client interest today. I’m proud that we launched a proprietary impact investment fund in 2020 focused on the Blue Economy, thus addressing 3 of the UN Sustainable Development Goals: responsible consumption, climate action and life below water. But we did not just launch a product. We actually intended to create access to innovative companies at the forefront of the blue tech revolution. And we are creating an ecosystem connecting external experts and our clients around those topics. Let this be the first step of many to follow. In shift, sharpen and accelerate, let me conclude on Page 26 the acceleration of our investments. Let me first talk about digital. We have made great progress on our long-term journey to enhance our clients’ digital experience. And in 2020 alone, we invested CHF 90 million in this area. COVID-19 has been a phenomenal accelerator to those investments. We have become one of the first Swiss wealth managers to deliver digital onboarding of clients in Switzerland, including full video identification. We have also delivered e-signature and chat capabilities as a new way of interacting with our clients. All of this anticipates a hybrid interaction model, which we believe is bound to stay post COVID and in the future. At the same time, we have been investing in data intelligence. This has given us a broader view and transparency on value creation between the bank and our clients as a basis for optimized value sharing and pricing. We have also further invested in AI and in robotics. But the future is not just about digital, it’s very much also about people. And so we have systematically invested in delivering value to our workforce and developing it. In 2020, from team leaders up to top management, we step-changed the range of our leadership trainings. We ran dedicated programs, for example, for our global assistant relationship manager population and will do more so in the future and also added dedicated training in the intermediaries business. And we have readied our staff to maximize the value of remote working, which, again, will remain, to some extent, as we have to determine in the future, as part of a more flexible, more agile way of working. We want to ensure that this is as rewarding for our people as it is for us. And talking about agile, that’s a big step. Many of our recent advancements in technology have been supported already by agile practices in software development. Now we want to take this approach much more broadly and one step further to other selected areas of our business. By 2025, we believe that around 2,000 of our employees will be working with agile practices. And with this, Julius Baer will definitely be one of the first pure wealth management institutions to gradually exploit the benefits of agility at scale and shorten our time to market. While building the future, we have also been determined to resolving the past, as is laid out on Page 27. In 2020, we have put in place all the critical design elements for our risk management of the future. This is the end of a 3-year upgrade focused on all aspects of our risk management, from a global upgrade of KYC to a fundamentally changed AML transaction monitoring; from due diligence in relationship management onboarding to a global client view and database; from enhancing our group risk management framework to introducing a new client risk rating methodology; and from a revised code of ethics to a new comprehensive disciplinary policy and process. At the same time, we have rejuvenated our entire risk management organization over the past 2 years. In 2020, we were also able to continue resolving legacy issues. I’m pleased that we reached an agreement in principle to resolve the FIFA matter with the Department of Justice in the U.S. We report all legacy issues transparently in our financial report, and we will continue to address them with the same determination going forward. Together with FINMA, we initiated a remediation process in February 2020. And we believe that we created the conditions now to complete the first milestones of FINMA’s audit and are thereby on track to resolve the FIFA, PDVSA enforcement procedure on time. By taking all those measures to resolve the past, we believe we are building and we have built a truly strong foundation for future growth. Let me look forward, and we will continue to execute on our strategic priorities in ’21 and realize the second leg of our strategic 3-year journey. Let me give you three main priorities for the coming year. First, and true to our mission, we will continue to enhance value for our clients. Putting the client at the core is what we do at Julius Baer, it’s our very essence. And to this end, we will further enable our relationship managers and our front teams to deliver the whole of Julius Baer to our clients. We will continue to invest in our solution range, and in particular, we’ll start to putting more energy behind creating client communities in 2021, moving from serving clients just one way to a dialogue and to a network-based approach. We are doing this, by the way, successfully already with the Young Partners Programme and our U.K. entrepreneurs platform, and we want to take it to the next level. Second, we keep our eye on productivity and we will deliver sustainable profit growth, and this has three parts. First, in the light of the expected headwinds, and we just talked about it before, for example, the persistent low interest rate environment or the dollar-Swiss franc exchange rate, it is imperative that we finalize the rebasing of our cost structure. And to this effect, we are continuing our program and we’ll deliver a further CHF 70 million of cost savings in ’21 depending on, to a certain extent, on the pandemic situation. As these measures will entail a reduction of roughly 280 jobs globally, we are firmly committed to carry out any necessary redundancies in consideration of local lockdowns and meeting restrictions. But these cost measures are, in our view, a necessity to, on one side, maintain our resilience in the future and in the face of uncertainty, but also to create leeway for future growth, investments and the creation of new jobs. In parallel, we will continue to accelerate revenue generation, as Dieter has already laid out, and also continue to drive sustainable asset growth as we did in 2020. Focus there is on share of wallet with existing clients, but also on selected additional growth in our key markets. Together, all of those measures will, on the revenue side, again, substantially contribute to our overall 3-year target. And last, we will continue to shape the future as Julius Baer for our people, for us as an institution, about training, it’s about compensation, but more than that, it’s about diversity and creating the workforce of the future, able to serve the next generation of our clients. Let me, on Page 29, reiterate our midterm targets for ’22: a cost/income ratio of 67% or below, a pretax margin of 25 to 28 basis points and an annual growth in pretax profit of over 10%. We are fully focused on delivering those targets, addressing the industry challenges by which we talked and with our continued active revenue and cost management and through strategic transformation. I also reaffirm our approach to capital management. Our dividend and capital return framework remain unchanged and reflects our strong capital generation. With a proposed dividend of CHF 1.75 per share, we will distribute 41% of 2020’s adjusted net profit to our shareholders, according to plan. We are also launching a new share buyback program after having had to suspend the previous one at the request of FINMA during COVID-19. This will run until the end of February ’22 and give us flexibility to return capital not required for investments in growth or possible M&A opportunities to our shareholders. With this active capital management policy, we still aim to deliver a return on CET1 of at least 30% by 2022, as stated a year ago. Let me conclude on Page 30 with my key messages and the positive and optimistic view forward. Julius Baer has demonstrated truly outstanding performance in 2020 with strong profitability, but also with a high quality of our earnings reflecting the strength of our business model and the trust of our clients. We have truly delivered on the first step of our 3-year transformation strategy, which gives us also a very clear road map for 2021 and beyond. We have discussed why we need to stay the course, the structural headwinds are clearly there and there are new opportunities to be captured, and we will stay our course. It’s time to act. And with all of this in mind, I am fully convinced that we are laying the ground stones also for a wealth management of the medium- to long-term future. That wealth management, in my humble opinion, starts with clients, with trust-based relationships, but also with serving the next generation of our clients. It is about having the best people in the industry and properly enabling them to do an even better job. It is about purpose and meaning and adding not just whats and hows but also whys to what we do. It’s about value-added solutions and great capabilities that truly differentiate ourselves. This future is very much about ecosystems and networks moving away from a top-down or one-way road to a dialogue and co-creation of content. And ultimately, the future is to those who master the economic challenges of our industry for the coming years. I am very much looking forward to the journey to get there, a journey that I firmly believe we will conclude as the most reputable and admired brand in our industry in the next decade. Thank you very much. And with this, we will now open up for Q&A. ================================================================================ Questions and Answers ——————————————————————————– Operator [1] ——————————————————————————– (Operator Instructions) The first question comes from Jon Peace from Crédit Suisse. ——————————————————————————– Karl Jonathan Peace, Crédit Suisse AG, Research Division – MD [2] ——————————————————————————– Yes. The first question is could you please talk a little bit about the monthly gross margin trend. I think you said an 85 basis point exit rate for November, December. So was that a little bit of a pickup from earlier on in the period? And did you say on Bloomberg this morning that January was running similar to December? And then my second question, please, is about the buyback. Just thinking about the size of CHF 450 million versus your previous annual run rate, which is about CHF 300 million. Is there an element of catch-up in that CHF 450 million figure given that you had to slow down the CHF 300 million last year? Or do you think that is a sustainable run rate assuming, obviously, that profitability is maintained for future buybacks going forward? ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [3] ——————————————————————————– I’ll take them. Thank you for the questions. I’ll start with the second one. I mean a share buyback is always a program. So it’s a decision case by case. The CHF 450 million, which will start 1st of March, was decided by the Board based on the very high capitalization and the profit in 2020. But I don’t think that you can extrapolate that to the future. It will always be a case-by-case decision. That’s on the share buyback. Then, as I said, November, December were very quite strong. Very strong months, good activity levels. And therefore, we indicated that this was at 85 basis points. October was a weaker month, but of course, the full year was relatively strong. We just wanted to give you an outlook also in terms of net interest income where that trended in the last 2 months of the year at around 14 basis points. January was, again, a strong month. I think Philipp mentioned it that especially in Asia, but in other parts of the world there was active trading due to events going on in the world and the volatility in the markets. ——————————————————————————– Operator [4] ——————————————————————————– The next question comes from Kian Abouhossein from JPMorgan. ——————————————————————————– Kian Abouhossein, JPMorgan Chase & Co, Research Division – MD and Head of the European Banks Equity Research Team [5] ——————————————————————————– I had 2 questions. The first one is on Lombard lending. You — I just wondered, in terms of releveraging by clients, do you see a pickup after the deleveraging in the first half? And how do you see client behavior and appetite in 2021 in respect to Lombard lending? And the second question is related to velocity. You mentioned velocity data at the beginning of your discussions. And I’m just wondering, do you think that can — on the ultra-high net worth space, do you think that can be seen across the industry? And you mentioned it’s going to digital as well as traditional players in the wealth management space. How is it affecting you? I’m just wondering, how do you see changes between new business and the digital space colluding or emerging, so to say? And what does that mean for your business? Just wondering if you could maybe give some comments in respect to Julius Baer. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [6] ——————————————————————————– Thank you very much for that. Let me say a word about releveraging, I think Dieter can add to that. Yes, we have seen obviously some releveraging throughout the year. I think in the first year, there was a very clear risk of stance. We have seen deleveraging, releveraging has happened, but not far above, let’s say, the previously achieved levels. I think clients are still having a degree of cautiousness as they go from 2020 into 2021, and rightly so. I think there is still a number of market risks out there and risks for substantial movements that don’t make this just, let’s say, an all-out credit year. But we will continue according to our conservative risk management policies and framework to develop this business together with our clients. As to the velocity and where the money flows, I think — let me say we repositioned ourselves. I think Julius Baer has positioned itself very distinctively as a very modern wealth manager that obviously offers digital channels and interaction ways with our clients. But we don’t put digital at the center of our business strategy. We certainly don’t want to push into an industrialization of wealth management and the robotization of high net worth and ultra-high net worth services. People play a central role in our business. And we’ve been using, as I laid out, digital technology to very much enable our relationship managers moving forward. With this said, I think, in these segments, in ultra- and in high net worth, I believe this U.S. study is very much confirmed also in our experience that clients are shifting assets to institutions they trust. And obviously, new digital players offer sometimes fascinating new opportunities for trading, but the core of the trust has been established over years, if not decades, with established players and relationships, and this is something we can greatly benefit on. I believe this core of our business will hold also for the years to come and benefit us in the next decade. ——————————————————————————– Operator [7] ——————————————————————————– The next question comes from Jeremy Sigee from Exane. ——————————————————————————– Jeremy Charles Sigee, Exane BNP Paribas, Research Division – Research Analyst [8] ——————————————————————————– I wonder if I could push you a bit more on the calibration of the buyback. I think you mentioned that it’s a function of strong capital and of the 2020 earnings. But I just wondered how you thought about that because it looks, for example, your capital, you’ve got about CHF 600 million excess above, say, a 12% CET1 ratio. So it looks from lots of metrics that you could have done more. You could have completed last year’s program as well as starting a new one. So I’m just curious what sort of metrics you look at in relation to that? And then my second question, please, was on the adviser numbers. There’s a sort of further reduction in the net total of advisers, but I know you’re doing sort of gross hiring as well as sort of releases. I just wonder where you are in that process and whether we’re now seeing adviser numbers stabilize and maybe grow going forward. Or is there more work to do? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [9] ——————————————————————————– Happy to take a word again on calibration of buyback. Maybe in another word, I think, again, we’ve taken an absolute perspective on the amount of excess capital we have today. And the Board on that basis has decided to properly scale the next buyback. The old buyback couldn’t be continued for technical reasons. And so essentially, we have to lay up a new program and we do that in the amount of up to CHF 450 million. On the adviser numbers, I think you’ll see this rightly. I believe that the overall number, which was a net minus, has been a combination of a gross minus and a gross plus. We have continued to hire even though, obviously, given the current conditions, but also given our strategic focus at a lower velocity than in previous years. We will continue to do that moving forward. I mean we have just announced the hiring of a specific team, for example, in the Americas. There are other hirings which are in the pipeline. We actually do enjoy a very strong pipeline of potential hires across the globe. And in that sense, we’ll selectively add to our workforce moving forward. While on the other side, we still keep concentrating our books. We intend to create larger books per relationship manager, as we have done in the last few years, because we believe that this is ultimately beneficial to all stakeholders, including our clients. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [10] ——————————————————————————– Sorry, just to add to the first question on buyback. Between dividend and share buyback, we will return almost CHF 850 million capital to the shareholders in 2020 — in 2021. ——————————————————————————– Operator [11] ——————————————————————————– The next question comes from Hubert Lam from Bank of America. ——————————————————————————– Hubert Lam, BofA Merrill Lynch, Research Division – VP [12] ——————————————————————————– I got 3 questions. Firstly, on just the net interest margin. What would you say is the outlook for net interest margin for this year? Do you expect it to improve anytime soon as loan rates go up and releveraging picks up? Or do you still expect it to remain under pressure? That’s the first question. Second question is can you talk a bit about client behavior and trading? Do you think current trading activity can be sustained at current levels? Or do you think this is just temporary due to the lockdown? And lastly, can you just talk a bit about your M&A ambitions. Would you like to do more deals? What is environment like out there for deals today? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [13] ——————————————————————————– Start with the client behavior and then leave the net interest margin to Dieter. I believe — I just look back, and when I take the 3 years preceding 2020, so ’17, ’18, ’19, actually a temporary phase of client abstention for the market turned out to be a very, very long period where clients were highly inactive and climbing the proverbial wall of worry or actually standing by the sidelines. Obviously, 2020 has been quite a reversal from that trend and clients have been very active. We are rubbing the same crystal ball for the future. But if I look at our activity level in January, which is, on average, about the same as last year, which, by the way, has been excellent until the end of the year; if I look at the market conditions out there with diverging speeds of recovery in the market, I wouldn’t expect this to be a smooth ride now of the economy out of the pandemic crisis, on the very contrary, and there’s still a bit of potential also on the political side. I think the signs are there that 2021 is going to be an interesting and an active year on the investment side. And it’s certainly a year where holding cash as investors is just not a great idea, it’s the one sure way of ultimately and in the medium term destroying value. Maybe Dieter on the net interest side? ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [14] ——————————————————————————– Yes. Thank you. So I think the fastest impact, positive impact, we would see is if the shape of the curve would steepen because we haven’t invested in the treasury portfolio in Q4 of 2020, so we have powder dry to reinvest. If it’s shaped — if it steepens a bit more, we would invest. But we do not believe that in the near future or even in the medium-term future, on the short end, the U.S. rates will move. So there is no impact, let’s say, on lending. And then you still have to consider that January, February in 2020, we had the benefit of higher interest rates. So that will also have a negative impact on 2021 negative interest rates. So at best, I would expect that we can keep the 14 basis points we indicated was the exiting basis points in — by the end of 2020. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [15] ——————————————————————————– Apologies, what was your third question? Core… ——————————————————————————– Hubert Lam, BofA Merrill Lynch, Research Division – VP [16] ——————————————————————————– Yes, third question was on M&A. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [17] ——————————————————————————– On M&A, I mean, as always, really we look around for potential targets in all the markets, not only in Switzerland, but also in the — in what we define as core markets to complement and increase our asset base to get critical size in all of these core markets. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [18] ——————————————————————————– But I mean you’ve seen from this year, I think, and we said that very clearly and we continue to say that our focus is on organic transformation. We have done many, many steps of our organic transformation. We’ll continue to do so in ’21. I believe M&A is always a welcome addition to it in case we have the right targets. ——————————————————————————– Operator [19] ——————————————————————————– The next question comes from Thomas Pohl from awp. ——————————————————————————– Thomas Pohl, [20] ——————————————————————————– I just wanted to ask again something you mentioned before, the rebasing of the cost structure. There is, I think, CHF 70 million left. And you said something with the reduction of the workforce. Could you explain this again. I think, last year, you said you wanted to cut 300 tops or FTE. So what are the current numbers? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [21] ——————————————————————————– Maybe — I give the overall context. I think we’ve announced at the beginning of last year a productivity program that entails revenues and costs of CHF 350 million in total, of which roughly CHF 200 million through cost, CHF 150 million through revenues. On the cost side, we have executed on full 2/3 of that in 2020. And given the boundary conditions that we see, we think it is imperative on our side to continue and to finalize the cost program now in 2021. This should lead to a run rate reduction of roughly CHF 70 million additional now through our actions in 2021 and this might entail up to 280 jobs globally. This is the number that we communicated. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [22] ——————————————————————————– But of course, not all of them in Switzerland and there will be in different jurisdictions. And from an expense perspective, we also said last February that we will hire people in other areas. And as always, we internalize external staff. So if you look — if you compare the actual FTEs at year-end compared to the previous year-end, you have to keep that in mind, the internalization and hiring on new people, especially in 2020, in the product area. ——————————————————————————– Thomas Pohl, [23] ——————————————————————————– Okay. But this is for the CHF 70 million or this 300 people that you announced last year, that is — that is your — that is done? ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [24] ——————————————————————————– Yes. That is done. ——————————————————————————– Thomas Pohl, [25] ——————————————————————————– Okay. That is — and that — and in that range also. Okay. ——————————————————————————– Operator [26] ——————————————————————————– The next question comes from Izabel Dobreva from Morgan Stanley. ——————————————————————————– Izabel G. Dobreva, Morgan Stanley, Research Division – Equity Analyst [27] ——————————————————————————– First, I have a question on your outlook for the fee margins into 2021. It looks like the advisory and the management fee margins have been relatively stable over the past 6 months. And also if I look at the percentage of the advisory mandate, that has been increasing. So how would you expect the fee margins on the advisory management side to develop over the course of 2021? Would you expect them to remain stable? And then the second question is on your revenue initiatives. Looking on the slide, it looks like CHF 70 million have already been extracted, but there is still some of those which are yet to come through the income statement. Could you give us a sense on the timing of the rest of the revenue initiatives, which still remain? And also, what is the timing in terms of when those should be flowing through the gross margins plus any examples that you can give us of specific product launches or action being taken, those would be helpful. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [28] ——————————————————————————– Answer on the fee margins. I think we have been working in the last few years to substantially increase the share of fee-based income and of recurring fees at Julius Baer. And I think we’ve done that very successfully through the rollout of our advisory service models, but also the further increase of use of our discretionary mandates, and by the way, also the use of services which are beyond the balance sheet, for example, in the wealth planning space. And we will definitely continue to do so moving forward. We have seen that those margins have been fairly stable. And I think, obviously, with the very good performance also delivered in 2020, I think this should be projectable as we go into 2021 with the long-term pressures associated, obviously, to that, as we’ve spoken about, let’s say, the 10-year horizon of development in wealth management. But this continues to be an area where we continue to invest. We continue to invest in the value proposition for clients, thereby also justifying our share of the value that is created. As to the revenue initiatives, I think in the last year, we’ve been running a very comprehensive program with more than 20 specific initiatives all across the globe and we will continue along those lines in this year. And it would just take half an hour to list all of them. I’ve mentioned some of them, specific product launches, for example, around sustainability, but around private markets; new offerings, for example, on the credit side, in structured and cash flow-based lending. We are continuingly expand our solutions range, obviously, on the market side and giving access to clients to volatility and to market movements. We have been taking great steps already in 2020 on the pricing side and systematically reviewing the value of client relationships. And we will continue to do all of that as we go into 2021. It would be very hard to mention one specific product. And there is not just one silver bullet that solves revenues, it’s a combination of the different effects, together with the front line configuration, together with our approaches to sales management that ultimately will create the impact of CHF 150 million run rate over 3 years. Dieter. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [29] ——————————————————————————– Yes. Just to add here. And so with all of that, what Philipp explained in terms of the asset-based fee and commission margin, I think the outlook is that it’s stable and we want, of course, to increase it. We want to increase it also by more discretionary mandates, where we changed the process throughout the entire organization. And then on timing, the goal will clearly be that on a run rate basis, we work — we achieve the additional CHF 70 million in 2021, so that we have the full impact of the CHF 150 million from all the different initiatives from 2020 and 2021 in the fiscal year or in the year 2022. ——————————————————————————– Izabel G. Dobreva, Morgan Stanley, Research Division – Equity Analyst [30] ——————————————————————————– So just to summarize, we should be expecting CHF 70 million additional from revenues and CHF 70 million additional from costs in terms of run rate over 2021 plus whatever is not already in the run rate. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [31] ——————————————————————————– That’s correct, yes. And as I said before — to the question before, sorry, just as a word of caution. We’ve said a year ago that we want to hire people. I mean some of these revenue initiatives, of course, need hiring of people. Direct investment was a team of 4 people, but we hired other people. So on the cost side, what we tell you in terms of the CHF 200 million is a gross figure and then we invest part of that, which then makes it to a net impact at the end of — or for the year 2022. ——————————————————————————– Operator [32] ——————————————————————————– The next question comes from Patrick Winters from Bloomberg. ——————————————————————————– Patrick Winters, [33] ——————————————————————————– I’d like to probe a bit further on acquisitions. And I know that you have declined to comment on these reported talks with both EFG and Rothschild. But can you give us an idea — and I know you’ve also said that organic growth is the priority and I understand that, but how should we feel about these bigger acquisitions? Is — should we be surprised if you would have talks about acquiring a CHF 100 billion-plus wealth manager? Is it a possibility? Even if it’s an outside possibility, how should we really think about that? It would be great if you can give us some more color on that. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [34] ——————————————————————————– Let me reiterate on what I said before and you just said it. I think, first, the organic transformation, obviously, is in the focus, has been in 2020, continues to be in ’21, ’22. On the other side, M&A has been something that Julius Baer has done very successfully in the past. I think we do have the muscle to make transactions, smaller transactions or larger transactions. And we will, in any case, do them with a very clear strategic objective in mind. So there should be no surprises to the strategic direction any acquisition might take in the next few years. It would help us to gain critical mass in certain markets. It’s very important to look at critical mass, not just overall, but actually in those core markets where we are present and you know where they are all across the globe. But in these 15 markets, I think our key focus is really to bring us further up the ladder and to create even more value to clients by driving the critical mass. So any potential target would have to add to this. Obviously, I think we’ve been continuously strengthening our solution range along the way, which would also be a potential angle for an acquisition. But we will stay within clearly that framework. Then, again, it’s a question of, will there be targets available? At what quality and obviously at what price? We are actively looking in the market, but we will see how this will play out over the next few years while we pursue relentlessly the organic transformation. ——————————————————————————– Patrick Winters, [35] ——————————————————————————– Okay. So should I understand from that, that these significant targets, CHF 100 billion-plus AuM, are something that you are looking at or something that you would consider? It’s not just kind of a dream, it could be a reality. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [36] ——————————————————————————– I mean look at our past and look at what kind of transactions we have done in the past. The larger transactions have been a reality. There obviously could be a reality, again, in the future. We will see. ——————————————————————————– Operator [37] ——————————————————————————– The next question comes from Anke Reingen from Royal Bank of Canada. ——————————————————————————– Anke Reingen, RBC Capital Markets, Research Division – European Banks Analyst [38] ——————————————————————————– Firstly, on the deposit base. I think you indicated or you also put on the slides about charging deposits. I just wonder, I mean I’m not sure if you can say about how much of your deposits you sort of like already started to charge, how much more you could do, but also importantly how successful you have been to shift deposits into other products and then make it more like a fee-based product. I mean you alluded, too, obviously, deposits are not making the client any money at the moment. And then just a brief question, number two, is the decline in relationship number. I just wanted to confirm that you’re not expecting any net outflows as a result. And then, lastly, on the new compensation model, you said 60% of the relationship managers are already under the new model. Does it also mean they are already basically paid for financial year 2020 under this model? And I just wondered if you can maybe talk — given the importance it has, can talk a bit more about, is it the split maybe qualitative and quantitative? Or what’s the main sort of like quantitative target that drives the compensation, maybe AuM base? Anything in terms of more detail would be quite useful. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [39] ——————————————————————————– Thank you very much. Let me start back to front. I think the new compensation model has indeed been an important milestone. We’ve introduced this for 60% or more of our RMs in 2020 and it will be active now for the fiscal year ’21. Obviously, I think these things always need to be implemented ahead of time to be active. Even though interestingly enough, I’d say many relationship managers have anticipated the performance metrics, which were embedded in the model, and have already started to change behavior throughout 2020, which was an interesting insight. The approach is the following. The model has a quantitative element, which is very strongly linked to profit generation. We use a proxy for profit generation. That takes into account, obviously, the revenues — the sustainable revenue base generated, but also the cost of doing business, including the cost of risk and the cost of capital. And then it has a very strong weight on qualitative factors, obviously, support of the strategy, but also behavioral elements. And the 2 elements are truly balanced to give sort of the right pay-for-performance on the one side, and on the other side, as I said, to enshrine also those principles of risk management. That’s really the basic design. We’re using one single design of the model across the globe, which we can then obviously calibrate regionally. To your question on declining RMs, I can say very clearly that in the — actually, last few years, and when I look at the outflows of RMs, we have not lost significant amounts of assets. I mean, obviously, there have been some associated to it. But our ability to retain assets has been very high. And obviously, in many cases also, as RMs are retiring, we’re working very constructively with them to hand over and to keep those assets. And so, no, I would not foresee the decline in number of RMs to affect our AuM base. Maybe Dieter on the deposits. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [40] ——————————————————————————– Yes. And then on the first question on charging deposits where there are negative rates. So we charge in, obviously, in Swiss francs, in euro, Danish krone and some other currency. We do this, as we explained earlier, client by client. So we assess the client — the overall client profitability and then the RMs decides with the team whether or not to charge. I said earlier it’s easier to charge for us in euro than in Swiss francs because that’s our home market, and we were able to increase the level or the percentage of deposits charged in — especially in euro in 2020 again. So it’s an RM decision, the RM in the compensation model Philipp just explained, is charged this negative rate. So he has an incentive, depending on the overall client profitability, to charge the client on larger cash holdings in these currencies. ——————————————————————————– Anke Reingen, RBC Capital Markets, Research Division – European Banks Analyst [41] ——————————————————————————– And how much is you charge? Is there like a success if you ask the clients you were charging? I mean do most clients then accept the charge? Or do they go out or shift into other products? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [42] ——————————————————————————– No. I think that the rate of success, I considered this very high, but it’s also due to our tailored approach. I think, again, with — the relationship manager has a possibility to not apply the charge in the context of a large, profitable and successful relationship. And on the other side, he has an incentive or she has an incentive to apply the charge in a case of very much cash deposit-driven relationships. And in those instances, the approach is actually very successful. ——————————————————————————– Operator [43] ——————————————————————————– The next question comes from Daniel Zulauf from Börsen-Zeitung. ——————————————————————————– Daniel Zulauf, [44] ——————————————————————————– I have a few question on the current situation in the financial markets. You have mentioned your recommendation that you give to your clients to stay invested or invest even more in the current year, anyway that holding cash was a bad idea. You said similar things. Now what we are observing at the moment is a highly speculative climate in these financial markets. I don’t have to tell you what I’m referring to. I would like to hear from you what are your recommendations to your clients in this current situation? How do you perceive the situation, which looks, yes, at least for me, as a distant observer, quite impressive. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [45] ——————————————————————————– I think this is a conversation you probably have best with our Chief Investment Officer, Yves Bonzon. But let me give you a simple answer. I think we look at it in a fairly simple and in a long-term way. I think there is obviously one element of being invested and then to do that prudently and broadly and properly diversified in the right risk buckets, and on the other side, benefiting in the very short term from very high volatility in very speculative areas. I mean one thing has nothing to do with the other, obviously. If I look at — I mean our asset allocation right now, the signals are clearly on risk on, but let’s make sure that we play the cycle right. On the equities, it’s cyclical topics like IT, value or small caps. There’s a bit of overweight in the U.S. So you will not hear anything that is completely out of whack when we come to this. The same, by the way, on fixed income, where the search for yield and the search for the right risk/reward has become very complex in the last few years where, I believe, a very active stance is clearly needed. And then it takes a long-term picture on FX and commodities. Again, I think the way how we advise our clients is very individual. We obviously set up the goals together with our clients. We set the respective risk appetite and then help them to implement. Still, just holding cash in a world of negative interest rates and in a world where liquidity is created at unprecedented paces will mean that, that asset will necessarily have to devaluate. And in that sense, I think there is no alternative to staying invested for clients who want to create value in the medium to long term. ——————————————————————————– Daniel Zulauf, [46] ——————————————————————————– Can you say something about Julius Baer’s own positions in the financial markets? Do you have taken positions on your own account in the market? What is the size of these positions? Or have they changed? Can you elaborate a little bit on that? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [47] ——————————————————————————– Julius Baer is not taking directional positions in the market. I think the only way where we’re doing it is obviously in treasury where we manage the interest rate curve and the credit curve. But I’d say, otherwise, the majority of our positions is hedging positions, for example, for client positions on the trading side, which are much more short term and which are much more hedging, let’s say, market derivatives than the directionality itself. ——————————————————————————– Operator [48] ——————————————————————————– The next question comes from Stefan Stalmann from Autonomous Research. ——————————————————————————– Stefan-Michael Stalmann, Autonomous Research LLP – Partner, Swiss and French Banks [49] ——————————————————————————– I have 3 short questions, please. The first one, going back to the topic of M&A. You suggested that you hope for resolution of the FINMA conditions imposed last year soon. Would that also include the restraint on large and complex M&A restrictions, you think? The second point relates to Kairos. It seems that you have showed in a relatively complex way of providing equity ownership to some key managers, including put structures. Can you maybe talk a little bit around what you have done there? And if possible, also give us an update on the assets under management in Kairos at the end of the year. And the final question, coming back to the new compensation model. I don’t know if it is possible to look at it this way. But if the new compensation model had been in place in 2020 hypothetically, could you give a rough indication of whether you think compensation expense would have been higher or lower than what it has been actually? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [50] ——————————————————————————– Thank you very much. I think in the order. On the M&A question, yes, we would also expect FINMA to lift their large complex transaction ban throughout 2021 and we have put, I believe, all those conditions now in place as to the end of last year. The time line, obviously, is up to FINMA. On Kairos, yes, we have created an ownership structure with the 3 asset managers, by the way, also allowing participation for other key personnel. And we have done that with the interest of truly aligning the interest of Kairos staff with the interest of Julius Baer, as a majority owner and of the business itself. And so we’ve created a structure that allows a participation in upside, if such an upside is truly created, but also to ensure that there is sort of a participation on the downside or there’s a cost associated to this optionality. And this has led to some complexity in the structure, but I think it’s justified with that means. And the third question? ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [51] ——————————————————————————– Maybe I can just add here. So the end of year, as the base of Kairos, was slightly higher than CHF 5 billion, CHF 5.2 billion. And they achieved the gross margin which was a bit higher than 100 basis points. So they closed the year, despite the outflows in 2019 and 2020, with a positive result. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [52] ——————————————————————————– And on the new compensation model, I think the question how it would have fared in 2020 is a bit of a hypothetical question for a simple reason that we have created a model for the future and obviously calibrated that with the parameters of the future business in light of the rollout in 2020, ’21 and the effect of the model in 2021 and beyond. What can clearly be said is that, obviously, in the new model, payout is very strongly linked to the profitability generated, so not just to the asset base or to the top line, but actually to the result incurred by the relationship manager, also adjusted for some, let’s say, risk and capital elements, and in that sense, will fully align itself with the development of the results of Julius Baer moving forward. And that was one of the most important objectives that we’ve also achieved. ——————————————————————————– Operator [53] ——————————————————————————– The next question comes from Andrew Lim from Societe Generale. ——————————————————————————– Andrew Lim, Societe Generale Cross Asset Research – Equity Analyst [54] ——————————————————————————– So the first one is on the impact of dollar weakening on your revenue line. Could you perhaps give an estimate of how much that would have been in the second half or maybe over 2020? We’d just like to see how much that impact would be. And then, secondly, on your offering for ultra-high net worth. If we look to the 2 largest Swiss wealth managers, they’ve always made a big deal about having in-house investment banking capability to offer a breadth of products to ultra-high net worths. Obviously, Julius Baer does not have IB capability. So I’m wondering here how you think that you can compete on the same front in terms of breadth of products. And also pricing, obviously, you have to bring in a lot of product — structured products and other IB products from outside. So presumably, you can’t make as much margin overall in your offering to ultra-high net worth as you grow your ultra-high net worth AuM. Does that have a more negative weighted impact on your gross margin? So I appreciate your thoughts there. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [55] ——————————————————————————– Let me start with the second one. I believe and we have always expressed this that we are firmly convinced that we can and actually should serve ultra-high net worth clients exactly in absence of having an investment bank. And we see this being one of the larger reasons why clients actually trust us. They trust us with a large share of their business, trust us also with advisory requirements, for example, in wealth planning, because we have that impartial position and we are not an investment bank who wants to make money through the next transaction. Obviously, not having an investment bank does not mean not having investment banking like-skills. And if I look at the skill set in our more than 1,000 solution experts, for example, on the credit side, but also in structuring, on the market side or in legal, I do believe that we play absolutely at par with the largest players out there and we are able to create multidisciplinary, complex solutions for our clients, but we’re able to do it at one table under one P&L rather than having to split it in 2 or 3 divisional P&Ls, thus creating also a much better client experience. And our clients show us time and again, actually, with the money they entrust us that this model does work. Maybe I’ll leave the dollar weakening. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [56] ——————————————————————————– Yes. I mean the way you have to look at it, about 52% of the client assets are between U.S. dollar and Hong Kong dollar and that impacts, of course, the revenue line. And the decline in 2020 of the U.S. dollar against the Swiss franc was more or less a steady line. So you easily can calculate, on average, what the impact was. ——————————————————————————– Operator [57] ——————————————————————————– The next question comes from Daniele Brupbacher from UBS. ——————————————————————————– Daniele Brupbacher, UBS Investment Bank, Research Division – MD, Banking Analyst and Head of Equities Research Switzerland [58] ——————————————————————————– Yes. You mentioned a few times and consistently for some time now that illiquid alternative asset classes are a key focus. And I was just wondering whether if you were to add a line on Slide 41 in the AuM breakdown, how would that look like? How much of the total AuM these days is what you would define as illiquid alternative vessel classes? And where you probably would expect that to go over the next 2 to 3, 4 years or so? And then, again, coming back briefly to the gross margin. I mean, Slide 11 is quite useful always to see these patterns. And I was just wondering the mix shift probably towards ultra. How much of that mix shift is behind sort of the recurring fee income margin trickling downwards over time? How important is that? And in that context, I think 2 or 3 years ago, you once quantified your ultra-high net worth share of total AuM. Could you — could you probably do that again? That would be useful. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [59] ——————————————————————————– Yes. So I’ll start with the second one. I think 2 years ago, we mentioned that we have more than CHF 150 billion assets under management coming from clients that have more than CHF 50 million with us. So that’s the definition of ultras. I think that has increased with the net new money since then and the market performance. And of course, the growing book of these clients have some impact on the average margin over longer term, but I wouldn’t say in the short term because, as Philipp mentioned, we’re also able to offer them more products and different products than smaller clients. And there is a delta in the margin, but I don’t think that it has an impact year-on-year. Then to the question about the illiquid assets. Indeed, I think a few years ago, we had this extra line. I can just confirm that the holdings of our clients with us in so-called alternative assets, like private equity hedge funds, is still below 2%. So it’s a really minor allocation of the assets. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [60] ——————————————————————————– Obviously, I think not everything can be counted on the balance sheet. You will find some of it also to be held outside of bankable assets. But it’s clearly an area of strong interest and strong development. ——————————————————————————– Operator [61] ——————————————————————————– The next question comes from Nicholas Herman from Citigroup. ——————————————————————————– Nicholas Herman, Citigroup Inc., Research Division – VP [62] ——————————————————————————– Yes. Most of my questions have been asked, but I do have 3 remaining, please. Just firstly — one on client behavior, one on Kairos and one on discretionary mandates. So on client behavior and net new money. As we look into 2021, with rates at 0 or negative, just curious, we are clearly seeing investing more and you referenced the search for yield. But just curious, are you also seeing clients withdraw more cash now to fund discretionary expenditures, be it houses or otherwise? And so I’m just wondering if there is a — if this affects the underlying dynamics of the net new money? Is there a greater underlying drag than in the past? Or is it more of a tailwind? Any color there would be interesting. On Kairos, could you help us — do you want to give investors a bit more color on what you expect the contribution from Kairos in 2021 and beyond, be it in terms of gross margin and growth? And then my final question on discretionary mandates. You referenced the stellar performance of Julius Baer mandates, structural mandates. But if I look at the penetration, it’s been really quite sticky, about — just under 16%, hasn’t changed in years. What needs to change to see that really start to pick up? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [63] ——————————————————————————– I’ll take the first and the third, if you wouldn’t mind. In terms of withdrawal of cash, I think it’s hard to quantify that systematically. But anecdotally, I can say that already the result of 2020 was affected by clients obviously reusing cash in the context of their real asset portfolios. Many of our largest clients to which I have been talking have been investing in industrial opportunities. They have been making use of short-term M&A opportunities or brought some cash back into their operating businesses. So you would see that kind of effect actually already in the 2020 result. That’s not going to just kick in, in 2021, but I would expect this to persist moving forward. In terms of the discretionary mandates, I think we’ve come out now of a very important period in the last 2 to 3 years on the one side of truly consolidating performance. And the way how we’re now set up on the discretionary side with the different boutiques within our investment management area is clearly the right path to deliver, let’s say, sustainable and repeatable performance under different market conditions. We have truly demonstrated that we can do that in the difficult conditions of 2020. And in parallel, we have to build also on the client experience and the way how clients are ultimately coming into those mandates. And that’s why I talked about the mandate solution designer, which we now just launched in 2020, first step. You’ve seen the Markets Toolbox has more than 10 years of run time. This is all brand new. And I believe that this will completely change again the client experience in that area. Where I would also like to get at this to a much more modular offering. Because in the past, I think wealth management always left our clients with choices, either to be an advisory or to be discretionary client. I believe the modern world should bring the 2 elements together, to have modules that are interchangeable and that they give clients much more freedom to contribute in some areas and actually to give the performance to professionals in others. And we are making those steps. We see actually the growth in Asia, which has been very encouraging. I mean it shows that we have a great product. And I’m very confident that we will be rising that bar as we go. Maybe, Dieter, a word on Kairos. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [64] ——————————————————————————– Yes. Maybe just in addition to what I said before, I mentioned the starting as a base CHF 5.2 billion at the beginning of 2021. Last year, the contribution of about 100 basis points. But obviously, there is — still, they charge performance fees. So the 100 basis points is part management fees, part performance fees and this depends on the performance of the funds and the market development in general. So it’s a bit — it’s a bit difficult to predict where the gross margin will be. ——————————————————————————– Nicholas Herman, Citigroup Inc., Research Division – VP [65] ——————————————————————————– Well, I think you cut out there. Sorry, I mean, I had the numbers before on AuM and gross margin for 2020. Just — did you say it’s just a bit too difficult, though, to predict growth going forward? Is that — and in terms of the gross margin contribution, again, is it reasonable that — would you basically expect a similar gross margin 2021 going forward? ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [66] ——————————————————————————– Yes, depending. If the funds perform the same way, the market behaves the same way, then it stays. But it could be higher or lower, depending on the performance fees they charge. ——————————————————————————– Operator [67] ——————————————————————————– Next question comes from Daniel Regli from Octavian. ——————————————————————————– Daniel Regli, Octavian AG, Research Division – Senior Research Analyst of Financials [68] ——————————————————————————– My first question is regarding the relationship manager hiring during the year. Obviously, had a net decline of 91. Can you give me a little bit the breakdown of gross hirings versus departures? And among departures, how much of those departures were, let’s say, from your position, intended and which part was unintended? Then the second question is regarding the net new money growth. Obviously, what we have seen during 2020 was quite a volatile. Net new money number was relatively low, net new money in H1 and then a relatively strong net new money in H2, which possibly was partly a catch-up from H1. But then also you had Kairos flows and you had this reallocation. So can you give kind of a — what’s your expectation for the future in terms of a normalized net new money growth number? What would you think of is a net new money number which you are happy with? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [69] ——————————————————————————– In terms of — thank you. In terms of the RM hiring, I think we don’t disclose the exact gross numbers. But to give you an impression, I think, obviously, the hiring in 2020 was very specific. We’ve been hiring specific RMs, small teams in some locations, actually all across the world, which was interesting, that even during a time of pandemic, teams in places such as Germany have been willing to sign on with Julius Baer, which I think is a testament to our long-term ability to attract talent. But I’d say this was a comparably relatively short number. Still, I think if I look at the pipeline in the next few years, we enjoy a healthy pipeline. We enjoy a lot of interest for Julius Baer as an employer. And we will definitely make use of those opportunities in the markets where they make sense. On the net new money growth, yes, obviously, there was a bit of a seasonal pattern in the first half. I think clients’ primary preoccupation was with keeping safe and coping with the pandemic, I think as everyone else’s. At the time of March and we almost tend to forget that 9, 10 months ago, we went into crisis mode and had to put 6,000 people to working from home immediately. Obviously, our clients were experiencing the very same. There may have been a bit of a catch-up moving forward. As to a normalized rate, again, I’d like to reiterate what we said at the beginning of the year. We are still operating a growth model, this is very important. So we have an ambition to continue growing also net new money, obviously, through different sources, through new hiring, through share of wallet. I would not be surprised if in the future we would be seeing net new money, again, coming into a target band that we used to have in the past. But in the past, it was a target and now it’s not a target anymore. So we don’t set an explicit target for net new money growth for the coming years. ——————————————————————————– Daniel Regli, Octavian AG, Research Division – Senior Research Analyst of Financials [70] ——————————————————————————– Okay. Very helpful. And may I add a third question, sorry, maybe regarding the cost/income target of below 67%. Obviously, now you have achieved 66%. And given the achievements in 2020 and let’s say even though we — if we assume quite a normalized gross margin for 2021 of around the numbers you guided, I think 67% doesn’t look very ambitious. Can you give me kind of what you’re thinking about this number is? ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [71] ——————————————————————————– I believe it is still a very ambitious number. And probably a year ago, no one would have said it’s not an ambitious number. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [72] ——————————————————————————– I believe it’s obviously our ambition not just to deliver this in 1 year, but to deliver these structurally and long term over a cycle. We’ve been talking about the headwinds that the industry is facing and that’s why it’s so paramount for us to continue and complete our work on the cost side, but also continue our work on the revenue side. We believe that we can make it and we are working towards it, but this is not going to go without work. And that’s actually true for the entire industry for the next few years. ——————————————————————————– Operator [73] ——————————————————————————– The next question comes from Piers Brown from HSBC. ——————————————————————————– Piers Brown, HSBC, Research Division – Banks Analyst [74] ——————————————————————————– Yes. Just — really just 3 small clarifications. But first of all, in terms of the net new money, I mean you’ve talked obviously a lot about wanting to focus on gaining share of wallet. I wonder can you actually say the 3.5% growth that you’ve managed in 2020, how much of that is actually share of wallet versus growth from new clients or new markets? The second question is on RMs. I mean I hear what you’re saying in terms of not wanting to give the hiring numbers, but you’re also talking optimistically about hiring opportunities going forward. So just in terms of the total net RM number that we’re exiting 2020 on, I mean should we assume that, that is just going to be a stable number going forward and the level of new hires will continue to more or less just offset attrition of existing RMs? And a final one on loan growth. I mean I’m just surprised that your loan growth is so much weaker than some of your peers. Most of your peers are registering double-digit loan growth in the second half, and you’re down about 3%. So if you could just give us some indications on why you think your loan experience has been so much weaker than the peer group? Is it because you’ve got more Lombard? Or is it that you’ve just done less on mortgages and structured lending? Any color there would be very helpful. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [75] ——————————————————————————– Let me take the first two. I think on net new money, there was a part of share of wallet in it, but I would say, for myself, still not enough. I think we still have benefited from inflows, obviously, last year from previous year’s hirings as we will continue in the further years from ongoing hirings, but I think there’s still substantial potential in our franchise to drive share of wallet. This has also to do with analytics. We’re properly understanding the client situations. And all our investments we’re doing in, for example, data analysis and in frontline tools, helps us to support those developments moving forward. So there’s still substantial potential. In terms of the relationship manager cohort, I would expect still, I’d say, for 2021, a slight — or in the short term, a slight net reduction to the current figure, but then, obviously, I think long term returning this number back into growth mode. But giving you the exact timing around that is difficult. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [76] ——————————————————————————– Yes. On the loan growth, it’s true that there was releveraging in the second half, maybe not as much as we thought. There was also the negative impact from the U.S. dollar on the overall lending, which is, as on the deposit side, more than 50% of our lending is in U.S. dollar. And in terms of penetration, we are slightly under the longer-term average, but we’re plus/minus on the average. So I’m not surprised. But lending, obviously, especially Lombard lending is part of the — of the revenue initiatives in 2021. And of course, we would be happy to extend lending to our clients. ——————————————————————————– Operator [77] ——————————————————————————– The last question comes from Adam Terelak from Mediobanca. ——————————————————————————– Adam Terelak, Mediobanca – Banca di credito finanziario S.p.A., Research Division – Banks Analyst [78] ——————————————————————————– I had 2 questions and then a quick follow-up. I just want to ask, clearly we’re a year on from the strategic plan. A lot’s changed. NII has been reset down CHF 250 million if you include swap income as well. And you’re talking about rebasing the cost base a little bit more, but targets are unchanged. So I just want to hear your thoughts on what’s changed, whether we’re thinking about different revenue mix or whether actually the cost contribution to those targets is going up. Second, I wanted to get into trading income. It’s up 50% reported. But again, if you adjust for the swap, I’ve got trading income doubling year-over-year. So I want to understand how much of that CHF 400 million is sustainable? I know you’re talking up the market environment this year, but clearly made a lot of money in March and April and whether the roll-off of this is going to cause an issue on a year-over-year revenue outlook into 2021. And then the clarification. We’re talking about the revenue initiatives. How much of those revenues are recurring fees, so kind of embedded into the fee margin? And then going forward, the rest of that run rate, how much of that is actually defending the fee margin? Or do you see some upside from that? ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [79] ——————————————————————————– Thank you. Let me leave the last question to Dieter. I’ll start with the first on strategic plan. I think when we set out the strategic plan a year ago, we’ve done that, obviously, with a degree of foresight and a degree of variability. Did we plan on a COVID crisis to come? No. But it was still a plan that allowed us to give some leeway on a 3-year horizon. This is why we’ve been sticking to those targets. It’s very important, I think, to have a strategy, to stick to it and to execute in a constant and continuous way against it. We continue to do that both on the revenue, on the cost side, obviously being nimble enough to adapt to changing market pressures as we’re moving forward. In terms of trading income, I mean, obviously, the word sustainable trading income is maybe not the right word. I think the right word for me is repeatable trading income. And for me, this is definitely repeatable trading income. The way how we’re set up, the way how we can work with our clients, but also the way how we can capture the value of flows and the way how we maximize that value through the right risk management, that is something that is truly established and that’s something that is replicable in other situations also moving forward. And I believe our business model is truly set to perform actually under different market conditions very, very well. And so in that sense, I’m confident that we have set the right basis to capture the opportunities moving forward. ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [80] ——————————————————————————– And on the last question, you talked about the asset-based margin? ——————————————————————————– Adam Terelak, Mediobanca – Banca di credito finanziario S.p.A., Research Division – Banks Analyst [81] ——————————————————————————– Yes. How much of the revenue initiatives that sat in the fee margin, so offsetting kind of the structural fee pressure going there? And how much going forward, that stablish guidance is, just kind of recouping some of the pressures rather than seeing upside from a revenue growth standpoint? ——————————————————————————– Dieter Amin Enkelmann, Julius Bär Gruppe AG – CFO & Member of Executive Board [82] ——————————————————————————– Yes. Of course, as Philipp explained in several occasions today, there are revenue activities and initiatives that would create or that will create asset-based fee income, discretion mandates, repricing then the older alternative assets, the direct investment topics, private equity via feeder funds that we want to grow and that we have grown in 2020. And they’re all — the revenues all go into the asset-based income and are mostly recurring income. ——————————————————————————– Operator [83] ——————————————————————————– We have a last question from [George Borges] from Tamedia. ——————————————————————————– Unidentified Participant, [84] ——————————————————————————– Yes, this is (inaudible) from (inaudible). Just a quick question to your compensation model. Is there a component in it that establishes responsibility of the senior management because as far as I understand in the FINMA decision regarding the former Julius Baer management, the lack of the proof that they had knowledge was the problem to, let’s say, proper punishment. ——————————————————————————– Philipp Rickenbacher, Julius Bär Gruppe AG – CEO & Member of Executive Board [85] ——————————————————————————– I think in our compensation model, and thank you for the question, even of the past, there has always been an element of responsibility. And the Board is obviously using all those elements of the compensation model as time goes by even though, obviously, we cannot comment on individual measures that we have taken with individuals. Thank you very much. I think as there are no more questions, I’d like to end this session here. Thank you very, very much for your time and for your attention and for your interest. I strongly believe that with these results, with our actions in the past and with our strategy moving forward, we are truly laying the foundation for the wealth management business of the future. And with that, see you next time. And thank you very much, indeed.

Originally published

In closing, as we move on to the next post, may I add that geoFence was designed and coded by US citizens to the strictest standards and I believe your family would feel the same!

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