Julius Baer cuts costs to counter strong franc

by Malcolm Curtis | November 14, 2011 |

Julius Baer Bank became the latest company based in Switzerland to announce spending cuts related to the strong franc. On Monday the Zurich-based private bank announced it was reducing expenditures in a bid to trim annual costs by around 40 million francs, including previously announced plans to cut 150 jobs.

“Given the group’s structurally high exposure to Swiss franc costs and non-Swiss franc revenue, as well as the continuing challenging business environment, further cost measures will be implemented,” the bank said in a statement. The rollback in spending includes a decrease in the number of rented premises “as well as IT-related write-downs”.

The reduction in positions will impact Julius Baer’s businesses globally, although the brunt of the layoffs is expected to affect Swiss operations. The move comes as the Swiss franc remains over-valued against currencies such as the Euro, according to the country’s central bank. In August the franc hit a record high against the euro and the US dollar, although it has since fallen back.

The euro was trading at just under 1.24 francs in foreign exchange markets on Monday morning after flirting with parity a few months ago. The franc strengthened after the Swiss National Bank intervened, pledging to use whatever measures necessary to ensure the euro would not drop below 1.20 francs.

This level remains considerably above what is considered healthy for the Swiss economy, given its dependence on exports. Unions have called on the central bank to intervene further to cut the value of the franc to at least 1.40 against the euro.

Switzerland’s two biggest banks, UBS and Credit Suisse, have each announced job cuts in a bid to boost profitability, while several other Swiss companies have shed personnel in response to the currency woes.

Bobst, the Lausanne-based packaging machinery manufacturer, last week announced 420 layoffs, most of them at operations in the Vaud capital. The measure amounts to an eight percent reduction in the company’s global workforce.

In the case of Julius Baer, the company is downsizing and restructuring even though its financial results appear to be relatively healthy. The bank said its profitability has improved over the past four months, although it did not divulge figures.

It reports financial earnings twice a year with the next report due on February 6, 2012. Julius Baer said its assets under management totaled 166 billion francs at the end of October, unchanged from the end of June. The bank said  net new money inflows combined with the impact of a slightly stronger franc “cancelled out the negative market performance attributable to overall weak stock markets.”

Julius Baer is still considered sufficiently strong enough to acquire other financial companies, given that it has already announced plans to use excess capital for acquisitions. The bank is rumored to be a candidate to buy a share of Basel-based Bank Sarasin, which is currently controlled by Rabobank, a Dutch company.

Last month, Rabobank said it was in talks to sell some or all of its 70 percent voting stake in Bank Sarasin. But a decision is not expected to be announced until the end of the month and Julius Baer is not commenting on the prospect.

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About Malcolm Curtis

Freelance English-language communications professional (writing, editing, translations) based near Geneva, Switzerland. Let me know if I can help you.
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