By Brenna Hughes Neghaiwi
ZURICH (Reuters) - Julius Baer posted a 50% rise in 2020 net profit on Monday and said it planned a share buyback, as booming markets and strong client trading helped the Swiss wealth manager overshoot its mid-term targets.
But shares fell 2.7% by 0951 GMT, as analysts said low and negative interest rates were likely to weigh on the group and strong client trading was unlikely to maintain its bumper pace.
Net profit attributable to shareholders rose to 698 million Swiss francs ($783 million) for 2020, as financial instrument gains and a surge in client transactions offset weak interest income.
"We delivered on the first leg of the three-year transformation strategy presented in February 2020," Chief Executive Philipp Rickenbacher said, adding that "structural difficulties" in the overall environment posed challenges ahead.
"In light of current industry challenges, from negative interest rates to a weak US dollar, we will stay our course and remain fully focused on achieving the 2022 targets we set a year ago," he said.
The bank said it intended to begin buying back up to 450 million francs of shares in March and proposed a 17% dividend hike to 1.75 francs per share.
"These are solid results," Citi analysts wrote, but said they expected "low single digit consensus downgrades" due to lower net interest income and because the current boom in transactions was not expected to continue.
Wealth managers saw a boon from the coronavirus pandemic in 2020, benefiting from bumper client activity levels and amassing fewer loan loss risks than high street peers.
Rickenbacher, appointed CEO in September 2019, has said he wants to focus the Zurich-based wealth manager more on the ultra-wealthy and trim costs, which he told analysts in a call on Monday would affect up to 280 jobs in 2021.
The strategy helped it achieve an adjusted cost-income ratio of 66.4% in 2020, ahead of its mid-term target of 67% by 2022.
Baer saw 15.1 billion franc inflows for 2020, as fresh client money and booming equity markets pushed the lender's managed assets up to 434 billion Swiss francs. But net interest income fell nearly a quarter due to lower interest rates.
The bank reported a 190 million franc goodwill impairment related to its Italian subsidiary Kairos, which has been dogged by poor performance and outflows since 2018.
It also reported a 73 million franc legal provision related to a U.S. investigation into its dealings with global soccer body FIFA.
($1 = 0.8918 Swiss francs)