Lombard Odier Posts Profit in First Report Since 1796

By Giles Broom  

Photographer: Simon Dawson/Bloomberg

Patrick Odier, Senior Managing Partner of Cie. Lombard, Odier SCA.

Cie. Lombard, Odier SCA, Geneva’s oldest bank, said first-half net income was 62.5 million Swiss francs ($68 million) in its first earnings report since the company’s establishment in 1796.
Lombard Odier’s cost-to-income ratio, a measure of profitability, was 80 percent for the period, as it invested in its private and institutional client businesses, the company said in an e-mailed statement today, without providing year-ago earnings figures. It managed 156 billion francs for clients at the end of June and total client assets, including those held in custody only, were 211 billion francs, it said.
“Our group is increasingly diversified, more
international and more balanced between private and asset management clients and we are expanding our partnerships with financial services providers,” Senior Managing Partner Patrick Odier, 59, said in the statement. “Our solid net profit allows us to continue investing in all three businesses.”
Lombard Odier and Pictet & Cie. Group SCA, Geneva’s biggest bank, reported a profit this week as they revealed earnings for the first time since opening their doors more than two centuries ago. The disclosures come as declining profitability and provisions for a U.S. Justice Department probe into tax evasion hurt earnings in the Swiss wealth management industry.
Lombard Odier, Pictet and Mirabaud SCA, founded in Geneva in 1819, dropped their centuries-old partnership structures in January. New corporate partnership arrangements came with the requirement to report earnings publicly.

Tax Program

Lombard Odier entered the Justice Department’s voluntary tax disclosure program in December. While the bank has set aside provisions to pay a possible fine, it hasn’t disclosed the amount, said managing partner Hugo Baenziger, a former chief risk officer at Deutsche Bank AG who joined in April.
“The moment we publish the number we provide for, that’s the number we have to pay,” Baenziger told reporters on a conference call today.
While Switzerland remains the largest hub for cross-border banking, with $2.3 trillion of assets, more than a third of its private banks were loss-making last year as companies set aside about 900 million francs for costs related to the U.S. investigation, accounting and advisory firm KPMG said in a report on Aug. 20.
Lombard Odier is run by eight managing partners, including Thierry Lombard, who has worked at the bank since 1976, and Frederic Rochat, who heads the firm’s London office. The bank employs about 2,000 people in 19 countries or jurisdictions.

Client Assets

Total assets of private clients were 114.7 billion francs, while institutional customers invested 47.8 billion francs. Assets from clients using Lombard Odier’s custody and technology services amounted to 48.5 billion francs, the bank said.
Lombard Odier recorded “slightly negative” net new money in the first half of the year after low interest rates prompted institutional clients to withdraw from its money market funds, Rochat said. Investments pulled from the asset management business outweighed positive net new money from private clients, he said.
Lombard Odier has hired fund managers such as New York-based Steven Bulko, formerly of Dillon Read Capital Management LLC and Goldman Sachs Group Inc. (GS) to boost business from institutional clients such as pension funds.
Bulko’s 1798 Fundamental Strategies Fund, which oversees $1.35 billion, gained more than 26 percent since he began running it in 2011, the bank said. The fund has declined almost one percent this year. Nathalia Barazal, based in London, manages $7 billion in convertible-bond funds, it said.