Julius Baer Group Ltd. proposed to increase its dividend as the Swiss private bank approaches a $547 million settlement with the U.S. over American tax dodgers.
Julius Baer will increase its dividend to 1.10 Swiss francs ($1.08) a share from 1 franc a year earlier, the Zurich-based company said in a statement on Monday as it reported annual earnings that missed analysts’ expectations. Julius Baer plans to grow the ordinary dividend payout ratio to 40 percent of adjusted net income, the company said.
The bank’s shareholders have been waiting to hear how it will deploy capital once the U.S. settlement resolves a four- year probe into how the company helped Americans hide money from the Internal Revenue Service. The company has been supporting growth with acquisitions in recent years as the costs of a crackdown on undeclared accounts by governments, low interest income and subdued client activity crimped profitability.
“Investors will be looking carefully at the new capital structure to gauge how the company will manage its new payout goal and satisfy management’s hunger for deals,” said Jonas Floriani, a London-based analyst with Keefe, Bruyette & Woods Ltd. “The margins were weak, although managed assets and net new money figures were in line, or better than consensus.” Floriani has an outperform rating on the stock.
Julius Baer was down 1.9 percent at 42.42 francs at 10:28 a.m. in Zurich, valuing the company at about 9.49 billion francs. The shares have fallen 13 percent this year.
The integration of new businesses and a drop in client appetite for risk depressed margins in the second half. The gross margin narrowed to 88 basis points for July to December, compared with 93 basis points in the second half of 2014, according to a company presentation.
The 2016 dividend was expected to be 1 franc a share, according to a Bloomberg forecast.
“Julius Baer has decided to introduce a sustainable and more predictable dividend policy,” the company said in the statement. “Pending a court hearing on the resolution, which Julius Baer expects shortly, the bank and the DoJ will announce the final resolution.”
Client-managed assets increased to 300 billion francs at the end of December, the company said in the statement. That compares with 297 billion francs at the end of October.