Stefan Bollinger Plans To Streamline Operations And Improve Client Experiences

Key Takeaways

• A leaner management structure and streamlined operations could enhance efficiency and positively impact net margins.
  
• Strategic emphasis on client-focused culture and technological enhancement might drive better client experiences and increase revenue.
  
• Operating leverage challenges, interest rate impacts, and Basel III implementation may pressure costs, margins, capital ratios, and revenue stability.

Catalysts

Provides wealth management solutions in Switzerland, Europe, the Americas, Asia, and internationally.

• The new CEO, Stefan Bollinger, intends to focus on high-quality net new money generation and sustainable long-term growth, which could enhance revenue growth in the future.
  
• Plans to significantly restructure the Executive Board and create a leaner management structure could improve operational efficiency and positively impact net margins.
  
• A strategic focus on client obsession and back-to-the-roots culture, enhanced by technology, might drive better client experiences and increase revenue generation.
  
• The extension and expansion of Julius Bär's cost reduction program aim to achieve significant cost savings, potentially improving earnings and net margins.
  
• Ongoing efforts to simplify group governance and streamline operations, including exits from non-core businesses like Kairos and Brazil, could enhance focus on core operations and improve overall profitability.

Julius Bär Gruppe Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Julius Bär Gruppe's revenue will grow by 7.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 26.5% today to 25.5% in 3 years time.
• Analysts expect earnings to reach CHF 1.2 billion (and earnings per share of CHF 6.4) by about February 2028, up from CHF 1.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as CHF1.1 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.1x on those 2028 earnings, up from 11.5x today. This future PE is lower than the current PE for the GB Capital Markets industry at 16.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.55%, as per the Simply Wall St company report.

Julius Bär Gruppe Future Earnings Per Share Growth

Risks

• The ongoing challenges related to operating leverage and the intensification of performer management to potentially address inefficiencies could lead to higher costs, impacting future net margins and profitability.
  
• The significant impact of changes in interest rates on net interest income, especially given the current balance sheet structure, could affect both revenue stability and margin resilience.
  
• Basel III final implementation will temporarily inflate operational risk-weighted assets due to historical losses, potentially pressuring capital ratios and impacting profitability.
  
• Potential outflows resulting from the alignment of risk tolerance and refinement of risk frameworks could affect net new money generation, ultimately impacting revenue.
  
• Uncertainty surrounding the completion and financial implications of the Brazilian business sale could lead to fluctuations in future earnings and financial stability.

Valuation

• The analysts have a consensus price target of CHF61.533 for Julius Bär Gruppe based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF67.5, and the most bearish reporting a price target of just CHF52.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CHF4.8 billion, earnings will come to CHF1.2 billion, and it would be trading on a PE ratio of 13.1x, assuming you use a discount rate of 8.6%.
  
• Given the current share price of CHF57.2, the analyst price target of CHF61.53 is 7.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.