Morningstar | Julius Baer Misses Consensus Earnings Estimates Despite Strong Results
Wide-moat Julius Baer reported strong first-half results, with net profit growing by 26% compared with first-half 2017. However, record profit of CHF 444 million was 6% shy of consensus expectations, and the counter traded 4% lower in Monday morning trading on the back of the miss. Assets under management grew by 3% compared with the closing balance at Dec. 31, 2017, with virtually all growth coming from net new money flowing into Julius Baer's portfolios, and with market performance detracting from assets under management. We maintain our fair value estimate of CHF 55/$11.50Â and our wide moat rating.Revenue grew by 12% despite a 2% decline in net interest income as low interest rates continue to put pressure on deposit margins. Gross margins (total revenue/assets under management) remained stable at around 90 basis points.
Cost growth were well maintained with a 2% decline in Baer's cost/income ratio to 67% for first-half 2018, despite a 7% increase in headcount.
Julius Baer remains one of the most profitable banks in Europe with strong growth prospects, but it seems to be priced for perfection, with consensus expectations looking overly bullish.
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