Swiss wealth manager Julius Baer signals a sharp slowdown in client activity, attributing the slump to its revised risk framework and escalating geopolitical tensions in the Middle East.
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Julius Baer Net New Money Misses Forecast by 47% on Mideast Uncertainty
Swiss wealth manager Julius Baer signals a sharp slowdown in client activity, attributing the slump to its revised risk framework and escalating geopolitical tensions in the Middle East.
Julius Baer Group AG reported net new money inflows of just 3 billion Swiss francs ($3.8 billion) for the first four months of the year, missing analyst forecasts by 47 percent and prompting a warning that the strong client activity seen in the first quarter is unlikely to persist.
"We continued to make solid progress on our strategic and operational priorities, keeping us firmly on track to achieve our medium-term targets," CEO Stefan Bollinger said in a statement, despite the slowdown.
The bank’s annualized net new money pace fell to 1.7 percent, a significant drop from the 2.7 percent recorded in the second half of last year. While assets under management rose 1 percent to 528 billion francs, driven by market performance, the miss on new inflows against a 5.7 billion franc consensus estimate sent a bearish signal to investors.
The slowdown at Julius Baer highlights the wealth management sector's vulnerability to geopolitical shocks, with the ongoing conflict in the Middle East directly cited as a cause for client hesitancy. This raises questions about the sector's growth trajectory if the conflict becomes protracted, potentially impacting firms with significant exposure to the region.
The bank attributed the slower pace of new money to a combination of its own revised risk and compliance framework, a pause in client re-leveraging, and heightened uncertainty stemming from the Middle East conflict. Citi analysts described the results as "a mixed bag" that could disappoint investors, while Vontobel's Andreas Venditti noted the surprisingly weak net new money.
Middle East Conflict's Broad Economic Shadow
The impact of the Middle East conflict extends far beyond the wealth management sector. The region's tourism industry, which had been booming and surpassed pre-pandemic levels in 2023, is now facing daily losses of around $600 million, according to the World Travel and Tourism Council. An Oxford Economics report warns that a prolonged conflict could result in a $56 billion loss for the year, with a 27 percent year-on-year decline in international visitors.
The conflict is not just rerouting tourists but is fundamentally altering travel behavior, with demand shifting towards perceived safer destinations like Spain and the Caribbean. With the Middle East accounting for 14 percent of global transit traffic, a sustained loss of confidence could have far-reaching consequences for the airline and hospitality industries, echoing the disruption seen during the pandemic.
This article is for informational purposes only and does not constitute investment advice.
