2005 Annual Report Julius Baer Holding Ltd. - GAM Holding AG

Private Banking
20
Private Banking
Private Banking’s financial year was
marked by the acquisition of the three
private banks from UBS in the fourth
quarter, broadly expanding the client
base and nearly doubling the assets
under management to CHF 122 billion.
The development of new money
reflected, among other things, various
special factors like portfolio shifts in
connection with the introduction of the
single-class registered shares as well as
the acquisitions announced in September.
All in all, an outflow of CHF 1.5 billion
resulted after adjusting for the sale
of Private Banking USA. At the same
time, however, CHF 10.7 billion of asset
growth came from investment performance,
with CHF 3.2 billion of this
amount due to the strengthening US
dollar.
Decisive for the growth of income, also
adjusted for the sale of Private Banking
USA, were the increased assets under
management compared to the previous
year. The higher value-based commission
revenues attributable to these
assets represent the largest share of
commissions at 71%. Following the hesitancy
of our clients in the first half of
2005, transaction volume picked up in
the second half of the year. This,
together with inclusion of the December
results of the newly acquired entities,
caused operating income to rise by 29%
to CHF 583 million. Included in this figure
are the proceeds of CHF 61 million
from the sale of Private Banking USA.
Operating expenses were up by 58%
to CHF 540 million, reflecting the costs
relating to the acquisition as well as
investments in general and human
resources needed for the implementation
of various strategic initiatives designed
to boost earnings and margins over the
long term. These include the intensified
expansion of our activities in the offshore
growth markets of Eastern Europe,
Latin America, the Middle East and the
Far East as well as the build-up of our
Private Banking presence in Germany as
planned. Rapid implementation of the
integration measures leading to the new
Julius Baer Group resulted in CHF 103
million of expenses for Private Banking,
and the sale of Private Banking USA
caused an additional CHF 33 million of
costs. After accounting for these onetime
items, Private Banking’s net profit
before taxes came to CHF 43 million.