Julius Baer's 2022 Could Prove To Be More Challenging

Wide-moat Julius Baer reported a 17 % increase in net adjusted profit to CHF 508 million for the second half of 2021, missing the CHF 560 million estimate from the poll of analysts conducted by S&P Capital IQ. However, the CHF 1 billion that Julius Baer reported for fiscal 2021 was in line with our expectations and marks an all-time high for the firm. The results confirmed that trading conditions would be more challenging in 2022. Costs could prove difficult to contain in the current inflationary environment, and with revenue growth expected to slow down, the challenge for Julius Baer is clear. Julius Baer should, however, still generate significant free cash flow, and management increased the dividend payout ratio to 50% of earnings from 40% previously; it also confirmed that it would look to repurchase CHF 400 million of its shares during 2022. We estimate that this implies generous total shareholder distributions equal to around 8% of its current market value. At 10 times forward earnings, Julius Baer does not look expensive. We maintain our CHF 69 per share fair value estimate and our wide moat rating.