Julius Baer slips on fears trading boom might fade

By Brenna Hughes Neghaiwi

ZURICH (Reuters) - Frenetic client trading as the COVID-19 pandemic took hold helped Julius Baer <BAER.S> deliver record first-half profits, but its shares fell on concerns the boost was unsustainable and falling revenues elsewhere could leave the bank exposed.

The Swiss wealth manager reported a 43% jump in half-year net profit to 491 million Swiss francs (415.00 million pounds) on Monday, as the pick up in client activity more than offset a drop in lending and a hit from falling U.S. interest rates. The bank also made a 49 million franc provision for credit losses.

"When we look into the second half of this year from a market perspective ... not everything is clear, but what is clear is that the recovery patterns will be heterogeneous," Chief Executive Philipp Rickenbacher told journalists.

With political risks also high, "this is going to create an environment which is prone to a degree of volatility," he added.

Julius Baer shares dipped 4% in morning trading as analysts worried the surge in trading might not last.

"The dependence on trading in the earnings increase is certainly a drag," Zuercher Kantonalbank analysts said in a note, adding a drop in gross margins in May and June did not augur well for the second half.

Baer had already announced in May an "exceptional increase" in trading had allowed it to offset the impact of sliding markets and a strong Swiss franc eating into its assets under management (AUM).

Switzerland's third-largest listed lender said on Monday AUM fell 6% from the end of 2019 to 401.8 billion francs at the end of June. That was despite inflows of 5.0 billion francs, particularly from clients in Europe and Asia.

Lending had picked up since May, Chief Financial Officer Dieter Enkelmann said, adding Baer expected net interest income to remain near May and June levels during the second half.

(Reporting by Brenna Hughes Neghaiwi; Editing by Mark Potter)