Julius Baer Earnings Call: Record Assets, New Cycle

Julius Baer Group ((JBAXY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Julius Baer Signals Rebound With Record Assets Despite Interest and Credit Headwinds

Julius Baer’s latest earnings call struck a cautiously optimistic tone, highlighting strong underlying business momentum against a backdrop of lingering credit issues and interest-rate pressure. Management emphasized record assets under management, robust net new money, disciplined costs and significantly stronger capital, while acknowledging substantial net credit losses, a sharp drop in net interest income and FX headwinds. The message to investors was that the core franchise is performing well, the balance sheet has been de-risked, and a new strategic cycle is in place to translate this into higher, more sustainable profitability over the coming years.

Record Assets Under Management Anchor Growth Story

A central highlight of the call was Julius Baer’s record CHF 521 billion in assets under management (AUM), up 5% year-on-year, underlining the resilience of its wealth management franchise despite market volatility and currency headwinds. Monthly average AUM rose an even stronger 7% to CHF 499 billion, while total client assets climbed 4% to CHF 614 billion. Management framed this as a key foundation for future revenue, stressing that higher AUM levels create a larger base for recurring fees and investment activity once markets normalize and risk appetite improves.

Net New Money Remains Solid Despite Active De-risking

Net new money (NNM) reached CHF 14.4 billion in 2025, equivalent to about 2.9% annualized growth and broadly in line with guidance, even though the bank deliberately reduced risk in parts of its book. In the second half, clients began to re-risk their portfolios, contributing roughly 0.6 percentage points to the NNM pace. Management portrayed this as evidence of returning client confidence and an improving activity backdrop, while also noting that the NNM performance came despite disposals – including the Brazil business – and stricter performance management within the adviser base.

Underlying Revenue and Profit Show Healthy Momentum

Stripping out the impact of net credit losses, Julius Baer delivered a solid improvement in underlying earnings. Operating income grew 6% to around CHF 4.073 billion, while underlying pretax profit jumped 17% to CHF 1.27 billion. The underlying pretax margin improved to 25 basis points, illustrating better profitability per unit of assets. Management argued that these numbers give a clearer view of the bank’s operational strength, which was temporarily overshadowed by one-off credit adjustments linked to the comprehensive loan book review.

Cost Discipline and Efficiency Gains Support Operating Leverage

Cost control was a consistent theme, with operating expenses rising just 1% to CHF 2.808 billion, well below the pace of underlying revenue growth. Julius Baer delivered CHF 130 million of gross cost savings, beating the CHF 110 million target, and kept cost-to-achieve at CHF 40 million. As a result, the expense margin improved by 4 basis points and the underlying cost/income ratio improved by about 3 percentage points to 67.6%. Management positioned this as evidence that efficiency programs are gaining traction, providing operating leverage even in a more challenging revenue environment.

Capital Strength and Balance Sheet Resilience Reassure Investors

The bank highlighted a significantly strengthened capital and liquidity position, a key reassurance for shareholders after recent credit issues. The core CET1 ratio climbed to 17.4%, up roughly 320 basis points on a pro forma basis since 2024, as CET1 capital increased 10% to CHF 3.9 billion and risk-weighted assets fell 10% to CHF 22.7 billion. Liquidity and funding metrics are robust, with a loan-to-deposit ratio of 62% and a liquidity coverage ratio around 261%. Management underscored that Julius Baer has ample buffers to navigate market uncertainty and support growth, even as risk-weighted assets may rise again in the next strategic phase.

Diversified Revenue Mix Offsets Net Interest Income Decline

Julius Baer’s earnings mix is increasingly driven by fees and markets-related income rather than net interest income (NII). Net commission and fee income rose 5% to CHF 2.314 billion, while net income from financial instruments surged 25% to CHF 1.608 billion. A standout contributor was treasury swap income, up 51%, with average swap volumes expanding 28% to CHF 27 billion. This growth helped offset a CHF 252 million drop in NII, illustrating how the bank is using its treasury and markets capabilities to cushion the impact of lower interest margins and balance-sheet adjustments.

Strategic and Operational Overhaul Lays Foundation for Next Cycle

Management devoted considerable attention to the progress made on strategic and operational initiatives during the year. A comprehensive credit review was completed, governance and leadership structures were upgraded, and the organization has been simplified. The group launched a new strategy and a three-year revenue and growth program, introduced a global finance platform, and began renewing its IT infrastructure in Switzerland. A new Global Products & Solutions unit is already showing traction, particularly in structured products where volumes have increased. These measures are intended to modernize the bank’s operating model and support scalable growth.

Credit Review Drives Significant Net Credit Losses

The downside of the credit clean-up was a sizable hit to reported earnings. The bank increased gross loan loss allowances to a total of CHF 279 million, resulting in net credit losses of CHF 213 million for 2025. These charges weighed on operating income and IFRS net profit comparisons and were a key reason the headline figures lagged the underlying performance. Management argued that these losses largely reflect legacy exposures identified during the credit review and that the resulting balance sheet is now much better protected against future shocks.

Sharp Net Interest Income Contraction Highlights Rate Sensitivity

Net interest income fell sharply to CHF 125 million, down CHF 252 million year-on-year, underlining Julius Baer’s sensitivity to interest-rate moves and mix shifts. Lower global interest rates, a shift toward low-rate Swiss franc loans, a weaker U.S. dollar and the near-complete wind-down of the private debt portfolio all contributed to the decline. Management acknowledged that NII is unlikely to be a major earnings engine in the near term, but stressed that fee income and treasury activities are expected to shoulder more of the profitability burden.

FX Headwinds and Market Effects Distort Headline Volumes

The weakening of the U.S. dollar created a sizeable drag on reported figures, reducing AUM by roughly CHF 38 billion and muting the visibility of underlying volume growth. Deposits fell 3% to CHF 66.8 billion and the loan book rose only 1% to CHF 42.1 billion. However, on an FX-neutral basis, deposits actually grew 3% and loans 5%. Management highlighted this discrepancy to argue that the franchise is growing in real terms, even if translation effects temporarily mask the progress in Swiss franc reporting.

Front-Loaded Investment to Pressure Short-Term Costs

Looking ahead, Julius Baer signaled that its next efficiency and growth program will come with some near-term cost pressure. The bank expects front-loaded, largely unavoidable investment costs in 2026–27, including around CHF 65 million of additional cost-to-achieve for new measures, on top of the CHF 40 million booked in 2025. While these investments are intended to unlock a further CHF 130 million in structural savings, the benefits will be back-loaded toward 2028. As a result, the cost/income ratio may edge higher in the short term before improving toward the sub-67% target.

Adviser Headcount Volatility Adds Execution Risk

Relationship manager (RM) headcount dynamics emerged as a key operational challenge. The net number of advisers declined in 2025 due to the sale of the Brazil business and tighter performance management, which led to elevated attrition. To restore growth capacity, the bank plans to hire more than 150 gross RMs in 2026, up from 120 in 2025. Management acknowledged the onboarding and execution risk associated with this push but argued that a stronger, more productive adviser base is essential to achieve higher net new money and deepen client penetration.

Regulatory and Capital Distribution Uncertainties Persist

Despite the strengthened capital base, Julius Baer’s ability to accelerate capital returns remains partly constrained by regulatory processes. Potential share buybacks remain subject to the approval of the Swiss regulator, and an enforcement proceeding is still ongoing. Management reiterated that the timeline and conditions for any additional shareholder distributions depend on regulatory sign-off and the successful delivery of the remediation program, adding a layer of uncertainty for investors who had hoped for a more immediate step-up in capital returns.

Concentration and Risk-Density Could Lift Capital Intensity

The bank flagged that its business mix carries some structural risk concentration. More than a quarter of AUM is tied to Asia and China-related clients, an area with attractive growth prospects but also geopolitical and regulatory complexity. Risk density currently stands at 21%, with guidance of 22%–24% for the new strategic cycle. As lending grows and the business shifts, this could put upward pressure on risk-weighted assets and capital requirements, moderating some of the benefit of the current strong CET1 position.

Guidance Points to Gradual Acceleration and Margin Recovery

Management reaffirmed clear quantitative guidance and a multi-year roadmap. AUM ended 2025 at CHF 521 billion, with net new money of CHF 14.4 billion (about 2.9% annualized), and the bank aims to lift NNM to 4–5% per year by 2028, with 2026 expected to be slightly stronger than 2025. Hiring more than 150 relationship managers in 2026 is central to this ambition. Underlying operating income (excluding credit losses) was around CHF 4.07 billion in 2025, with expenses of CHF 2.808 billion and an underlying cost/income ratio of about 67.6%. Management warned that the ratio may rise modestly near term due to front-loaded investments, before falling below 67% by 2028 as another CHF 130 million of structural savings are realized. On capital, Julius Baer is working toward a mid-term return on CET1 above 30%, with an underpin at 14%, and expects risk density in the 22–24% range. The bank intends to maintain its dividend at CHF 2.6 per share, keeps a forward tax-rate assumption of 18–20%, and plans to use interest-driven income and treasury swap volumes to offset ongoing pressure on net interest income.

The earnings call ultimately portrayed a wealth manager that has absorbed a painful credit clean-up, rebuilt capital and is leaning into a new growth and efficiency cycle. Record AUM, solid net new money and improving underlying profitability point to a franchise that remains competitive, even as net interest income, FX swings and regulatory uncertainties weigh on the near-term picture. For investors, Julius Baer now appears to be entering a phase where execution on hiring, technology and risk management will determine whether its ambitious growth and return targets can fully translate into shareholder value.