UPDATE 1-Shares of Swiss private bank EFG plunge after earnings disappoint
ZURICH, July 29 (Reuters) – Shares in EFG International plunged nearly 19 percent on Wednesday after the Swiss private bank sharply missed first-half profit expectations, saying market uncertainty in the euro zone, Brazil and China hit fee income.
New Chief Executive Joachim Straehle described the results, which included a drop in managed assets, as “disappointing”, a sense echoed by analysts.
“All profit and loss and operating metrics moved in the wrong direction in the period,” Kepler Cheuvreux analyst Peter Casanova, who has a ‘reduce’ rating on the stock, said in a note.
In another blow to earnings, EFG scaled back lending, including to wealthy clients, that did not complement its private banking strategy and offered inadequate returns.
Net profit for the period was 48 million francs ($50 million), well below a Reuters poll forecast of 74.9 million francs.
This was however a turnaround from a net loss of 6 million francs in the same period last year when earnings were hit by low interest rates on asset and liability management as well as fragile client sentiment.
Assets under management fell to 80.2 billion francs in the first half, from 84.2 billion at the end of 2014, and lagging analysts’ forecasts of 83.6 billion francs.
EFG shares plummeted by as much as 18.6 percent, their sharpest slide since July 2010. At 1001 GMT, they were 17.1 percent lower at 11.60 francs, lagging a 0.3 percent rise in the broader European banking sector. That wiped out gains in EFG shares this year, and they are now down 1.3 percent since the start of 2015.
“We would like basically to do much better in the second half. We will also keep moving, start all the different initiatives and basically show our muscles hopefully in 2015,” Straehle, who became CEO in April, told a press conference in Zurich.
Crucial to this will be the success of efforts to cut costs as well as bringing in high-quality bankers to drum up fresh business, as outlined in an action plan put forward by Straehle.
U.S. TAX DISPUTE
The bank’s finance chief, Giorgio Pradelli, also said EFG hopes to strike a deal with U.S. authorities by the end of September in a programme for Swiss banks that may have helped wealthy American clients to evade tax.
EFG is one of several dozen banks to participate in the voluntary programme set up in 2013, in which banks who report suspected tax evasion in U.S.-related accounts and pay penalties can avoid tougher punishment.
More than 20 Swiss banks have so far reached settlements as part of the programme, and EFG has set aside 30 million francs to cover possible penalties and costs.
The United States aims to reach agreements with all the remaining banks by the end of this year. ($1 = 0.9613 Swiss francs) (Additional reporting by Michael Shields and Rupert Pretterklieber; Editing by Gopakumar Warrier and Susan Fenton)
