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EANS-Adhoc: Bank Sarasin + Cie AG
Sarasin Group comes to a temporary halt on
its growth path
-------------------------------------------------------------------------------- ad-hoc disclosure transmitted by euro adhoc with the aim of a Europe-wide distribution. The issuer is solely responsible for the content of this announcement. -------------------------------------------------------------------------------- 23.02.2012 Assets under management decline to CHF 96.4 billion owing to negative market performance - CHF 1.5 billion of net new money received - Solid earnings from core business - Adjusted Group profit comes to CHF 111.7 million - Shareholder realignment progresses as planned Growth slows: negative market performance reduces client assets The Sarasin Group saw the growth of net new money slow significantly in 2011, which meant this growth did not compensate for the negative effect of the market environment, which totalled CHF 8.5 billion. While CHF 3.9 billion flowed into the Group in the first half of 2011, the second half brought a decline (CHF -2.4 billion) that can be attributed to several factors. As predicted, the Sarasin Group experienced outflows in response to its rigorously implemented strategy focusing on tax-compliant assets. Furthermore, the popular initiative for a national inheritance tax has already started to have an effect due to a retroactive clause - even before it has come into force. In addition, a number of large institutional investors decided not to renew their fixed-term deposits due to the adverse market situation, and withdrew their money towards the end of the year as part of their cash flow planning. Conversely, new clients showed a great reluctance to commit funds in the second half of 2011 because of media speculation about the change in Bank Sarasin's shareholder structure. Total net new money growth for the full year under review amounted to CHF 1.5 billion, equivalent to a growth rate of 1.4%. Assets under management at the Sarasin Group at the end of 2011 stood at CHF 96.4 billion. 40 percent of clients domiciled in Switzerland Around 40% of the Sarasin Group's clients come from its home market of Switzerland. The percentage of clients domiciled in Europe (excluding Switzerland) is only slightly lower, at 37%. There has been a slight increase in the proportion of clients based in the high-growth regions of the Middle East and Asia. They now account for 18% of the total. As a result of the Group´s focus on the regions of Europe, the Middle East and Asia, the percentage of clients from other parts of the world has continued to shrink and now lies at 5%. Christoph Ammann, Chairman of the Board of Directors of Bank Sarasin & Co. Ltd "The transaction between Rabobank and the new majority shareholder Safra is an important milestone for our bank. As a majority shareholder with a long-term view and ample capital funding, Safra creates stability and confidence for our clients as well. The wave of consolidation that has gripped Swiss Private Banking is expected to continue apace. As far as we are concerned, however, Safra's decision already gives us the security we need." Joachim H. Straehle, CEO of Bank Sarasin & Co. Ltd "Despite an environment characterized by ongoing uncertainty, we do not plan any fundamental change of direction. We are convinced that our focus on sustainability and tax-compliant assets will pay off in the long run and that with the backing of Safra as a well-capitalised majority shareholder we can look forward to exciting prospects. We are systematically pursuing our existing strategy. Our mid-term targets remain unchanged." Solid earnings quality in the core business Considering the smaller business base and the reluctance of clients to engage in any activity due to market turbulence in the second half of the year, the operating result is satisfactory. Net interest income was 1% higher at CHF 148.9 million. Income from commission and service fee activities shrank by 4% to CHF 440.7 million. Income from trading operations rose sharply by 57% to CHF 93.8 million. This was because there was no longer any negative impact in treasury business or proprietary trading created by hedging transactions against rising interest rates. Nor was there a negative currency translation effect. Income generated by subsidiaries from trading in foreign currency and currency options was higher as well. The Sarasin Group´s operating income during the year under review was practically unchanged at CHF 686.2 million (2010: CHF 690.6 million). Comparability of operating performance requires adjustment for one-off effects Internal and external expenses incurred in connection with the intended sale of Rabobank's majority stake came to around CHF 10 million. A restructuring in Private Banking created one-off costs of CHF 2.5 million. In addition, Bank Sarasin decided, in accordance with the principle of prudence, to completely write off the remaining intangible assets (originally to be amortised over time) for the stake in bank zweiplus ltd. This corresponds to an extraordinary impairment charge of CHF 11.5 million, which will allow ordinary write-downs to be reduced by CHF 1.3 million per year in future. There was no change to the bank zweiplus goodwill carried on the balance sheet. Results-neutral sale of financial stake in Neue Zürcher Bank Bank Sarasin sold its stake in Neue Zürcher Bank (NZB) back to NZB in December 2011. At the end of 2009 Bank Sarasin had already revalued its 40% financial stake in NZB Holding in accordance with the principle of prudence, and impaired the value of the stake by CHF 70.2 million. The sale had no influence on the Bank´s 2011 business results. Performance-oriented HR policy There was a further expansion in the workforce during the year under review. While in Switzerland mid-office and back-office operations were strengthened, the CRM team outside Switzerland was significantly expanded with the recruitment of 20 new advisors. The planned recruitment of around 50 new CRMs (gross figure) and the consistently applied performance-oriented HR policy led to the desired further improvement in the quality of the CRM team. Professionalism, quality and an awareness of the needs of an expanding international clientele are the hallmarks of the bank´s client advisors. These characteristics should facilitate the acquisition of new business over the next few years. The total number of CRMs across all of the Sarasin Group's locations showed a net increase of 3% during the reporting period, from 434 to 446. Moderate cost increase despite continuing investment in growth Personnel expenses increased by 4%, mirroring the increase in headcount, to reach CHF 382.2 million (adjusted) in the period under review. Despite the constant level of international marketing activities, combined with investment in new locations and the further development of systems and processes, general administrative expenses fell by 2% to CHF 133.6 million (adjusted). Depreciation and write-offs increased by 9% to CHF 33.5 million, mainly because of the investments made during the past year in various Group IT systems, as well as the rollout of Avaloq in Asia. Valuation adjustments, provisions and losses remained more or less at the previous year´s level. Overall, the Sarasin Group´s adjusted operating expenses during the reporting period showed a moderate rise of 2% to CHF 515.8 million (2010: CHF 505.2 million). The cost-income ratio increased to 80.0%. The adjusted Group result fell 10% to CHF 111.7 million. The adjusted return on equity came to 8.7%. The equity ratio was virtually unchanged at 7.2% as at 31.12.2011. The BIS Tier 1 ratio, defined as core capital as a percentage of risk-weighted assets, came to a solid 15.6% at year-end 2011, meaning that the Group already fulfils the new standards. The Sarasin Group has no Greek, Irish or Portuguese government bonds on its books, and only very little Italian or Spanish sovereign debt. Neither does it have any outstanding loans to Greek, Italian, Portuguese or Spanish banks. It has just one outstanding loan, a very small one, to an Irish bank. Realignment of shareholders proceeds according to plan Work on the project to complete the sale of Rabobank´s majority shareholding in Bank Sarasin to Safra is progressing as planned. The first approvals of the transaction from regulatory bodies have been received. The transaction should be completed by mid 2012. Annual General Meeting: Motions proposed by the Board of Directors The Board of Directors will submit a proposal to shareholders at the Annual General Meeting of 26 March 2012 to allocate the entire profit to the general statutory reserve. The Board also intends to submit a proposal for an exceptional payment to be made to shareholders. This proposal will be made at an extraordinary general meeting to be held once the sale of Rabobank´s shareholding to Safra has been completed and Safra has made its mandatory tender offer to public shareholders. Pim W. Mol's term of office as a Board member is scheduled to end at the Annual General Meeting on 26 March 2012. In view of Safra's planned acquisition of Rabobank's majority shareholding, the Board of Directors proposes Pim W. Mol for re-election for a term of office lasting only until the closing of the transaction. Elections of the representatives of the new majority shareholder Safra will be held as part of a general re-election of the Board of Directors at an Extraordinary General Meeting to be convened after the closing of the transaction. Outlook: return to faster growth - appointment of 75 additional relationship managers Despite the still subdued market environment, the Group will stick firmly to its growth strategy. This focuses on selected markets in Europe, the Middle East and Asia, with potential assets under management of CHF 3 and 5 billion per country in the mid-term. This volume allows the Bank to comprehensively service the markets while at the same time maintaining cost efficiency. The Sarasin Group plans to recruit a total of 75 extra CRMs (net) over the financial year 2012 in order to further improve both the quality and quantity of client advisors in our bank. Accordingly the bank expects to return to its planned growth trajectory. It does expect to see some more outflows of money in 2012 owing to the implementation of its strategy focusing on tax-compliant assets. But at the same time Bank Sarasin believes that the acquisition of the majority shareholding by Safra will allow the further development of its already strong position as an independent Swiss private bank, the further strengthening of its CRM team and, therefore, the successful acquisition of new client assets. Mid-term targets remain unchanged By 2015 Sarasin Group aims to manage clients assets totalling CHF 150 billion (performance-adjusted). At the same time, operating results should be increased thanks to a significant improvement in the gross margin. Further efficiency gains should lead to a substantial reduction in the cost-income ratio. Overall, the Sarasin Group continues to strive for solid growth while maintaining a strong capital base. Bank Sarasin & Co. Ltd´s 2011 Annual Report is available from today, 23 February 2012, 7.00 a.m., at www.sarasin.com. Further inquiry note: Dr. Benedikt Gratzl Head Corporate Communications T.: +41(61) 277 70 88 Benedikt.Gratzl@sarasin.ch end of announcement euro adhoc -------------------------------------------------------------------------------- issuer: Bank Sarasin + Cie AG Elisabethenstr. 62 CH-4002 Basel phone: +41(61)277 77 77 FAX: +41(61) 272 02 05 mail: email@example.com WWW: http://www.sarasin.ch sector: Banking ISIN: CH0038389307 indexes: SPIEX, SPI ex SLI stockmarkets: official dealing/general standard: SIX Swiss Exchange language: English