Ladies and gentlemen, I wish you a very warm welcome to the presentation of our half- year results 2021. Once again, my colleague, Dieter Enkelmann, our CFO, and myself are bringing this presentation to you from our art zone here in Zurich. We are getting used to the pandemic mode now, but are very much looking forward also for it to come to an end. Let me start with three key messages. We have delivered outstanding results again in the first half of this year. We have delivered the highest profit in the history of Julius Bär so far. We have delivered robust net new money inflows at an annualized growth rate of 4.6%, and that's despite our emphasis on profitability. Lastly, we have confirmed our financial strength shown by our very solid balance sheet and strong capitalization.
After the transformation of the last 18 months and well into the current strategic cycle, we are operating today from a position of strength. We have a unique and complete focus on wealth management and on high- net- worth and ultra-high- net- worth clients. This minimizes the complexity of our business model. We have demonstrated our high resilience and our scalability throughout the pandemic. Our continued investments in risk management are paying off. These have allowed us to address the main legacy issues and provide excellent risk management in markets and credits, and build the platform for future growth. We have already implemented the shift towards profitable growth, both by shifting metrics and tools, but also by embedding it in our behavior and culture. All of these achievements are embedded in a broader aspiration to create value beyond wealth for all stakeholders.
We have done this very consistently over the last 18 months, especially the last half year. We are focused on our clients by constantly adding value to their experience at Julius Bär, and we have focused on our shareholders through a compelling equity story. I look forward to sharing more details about all those points during my business update in a few moments. First, I will now hand over to Dieter Enkelmann, who will take you through the specifics of our half-year results.
Good morning. Thank you, Philipp. In the first graph on this slide, one sees clearly that after the sharp decline last year in Q1, the stock market started a clear recovery that continued almost without interruption in the first half of 2021. In the second graph, we see that stock market volatility rose to exceptionally high levels in March of last year, after which volatility started gradually grinding down towards pre-2020 levels at the end of June of this year. The third graph shows that while the U.S. yield curve has been steepening somewhat in the last six months, the short-term U.S. rates are still substantially below the level at the start of 2020. This had ultimately a negative impact on our net interest income.
Finally, in the last graph, we see that the U.S. dollar recovered somewhat versus the Swiss franc in the last six months after the sharp loss in value last year. Moving on to the results, starting with development of client assets on slide 7. Assets under management grew to CHF 486 billion, an increase of CHF 52 billion, or 12% since the start of the year. This strong increase came on the back of continued positive net new money of CHF 10 billion, a positive market performance of CHF 28 billion, and thanks to the mentioned higher U.S. dollar, a positive currency impact of CHF 14 billion. Monthly average AUM, important for the margin calculation, rose to CHF 460 billion, an increase of 14% from a year ago.
Net new money reached CHF 10 billion or 4.6%, which is double the level of a year ago. We saw particularly strong inflows from clients domiciled in Asia and across Western Europe, as well as solid growth in the Middle East. Around half of net new money came from RMs who joined before 2018, which partly confirms a further improvement in the client share of wallet. Moving on to operating income on slide 9. Revenue grew by 8% to CHF 2 billion, mainly on the back of a strong rise in commission and fee income, which significantly outweighed decline in net interest income following the year-on-year drop in U.S. rates. Compared to the first half of 2020, commission and fee income grew by 12% to almost CHF 1.2 billion.
This was largely due to a strong rise in recurring fee income following not only the rise in client assets, but also an increase in penetration of higher value mandates relative to more basic mandates. In addition to higher fee income, we also saw a further increase in transaction-driven commission income on the back of continued healthy client activity, particularly in the first quarter of 2021. Net interest income declined by 8% year-on-year to just over CHF 300 million. This followed the sharp drop in U.S. interest rates, which drove down credit income despite the year-on-year increase in average loan balances, and also resulted in lower income from our treasury portfolio. On the plus side, despite higher deposit volumes, the interest expense on deposit virtually disappeared, falling to just CHF 4 million.
Net income from financial instruments, or what used to be called trading income, declined slightly by 2% to just over CHF 500 million. This is compared to a period of extraordinary activity in the first half of last year, when market volatility reached exceptionally high levels, as showed on the first slide. In the first half of this year, particularly in the first quarter, overall trading volumes actually remained relatively elevated when looked at in a longer-term historical context. Client activity in FX and precious metals came down following the lower volatility. Other income went from CHF 31 million negative to CHF 27 million positive, mainly as a result of a CHF 48 million year-on-year decrease in credit provisioning to just CHF 1 million, which underlines our continued good long-term credit risk track record. Moving to slide 10 on gross margin.
The gross margin analysis shows clearly the effect of the lower client activity year on year, with the trading income margin falling by 4 basis points to 22 basis points, and in the graph on the right, the transaction-driven component within commission and fee income dropping by 2 basis points to 14 basis points. It also shows that compared to the second half of last year, both of these components improved somewhat. Net Interest Income margin fell by 4 basis points from the level of a year ago, but essentially stabilized versus the second half. Good news come from the recurring fee component, which rose by 1 basis point to 36 basis points. In terms of the exit gross margin of this half year, in the second quarter, the gross margin was approximately 81 basis points, of which a bit more than 13 basis points comes from net interest income .
Moving to the expense side. Compared to the first half of 2020, and despite the strong rise in revenues, total adjusted operating expenses rose by just 1%. Personnel expenses were essentially unchanged at CHF 849 million. The average number of staff fell by 1% year-on-year, despite further internalization as part of the efficiency improvement plan. Personnel expenses included CHF 14 million of severance costs related to the cost reduction program, slightly lower than the CHF 19 million booked in the first half of 2020. At the same time, performance-based accruals increased following the strong improvement in revenues and profit. General expenses rose by 4% to CHF 312 million. However, excluding the CHF 29 million rise in provision losses, general expenses actually came down by 6%, as the benefits of the cost reduction program more than offset the further rise in non-capitalized IT-related expenses.
Depreciation and amortization went up by 7%, reflecting the rise in IT investments in recent years. As a result, the cost income ratio improved by 5 percentage points to 61%, and the expense margin by 8 basis points to 53 basis points. As a result, adjusted profit before tax improved by 20% to CHF 742 million , and the pre-tax margin by 2 basis points to 32 basis points. Adjusted net profit grew by 21% to CHF 636 million , a new half-year record, and IFRS net profit by 23% to CHF 606 million . In the table on the lower left-hand side, you see that the return on CET1 capital improved by 2 percentage points to 38%. Our guidance for the adjusted tax rate in the next few years is slightly increased to between 14% and 15%.
In last year's strategy update, we laid out a three-year plan to enhance revenues in order to offset the ongoing margin pressure on the industry and to improve cost efficiency. We made progress last year in 2020 and further progress in 2021, and we believe we are on track to deliver the targeted improvements. I start on the revenue measures. Of the targeted CHF 150 million in gross revenue improvements over three years, we achieved close to half, CHF 70 million, in 2020. In the first half of 2021, we added another CHF 50 million on a run rate basis, of which around a quarter is already reflected in the P&L in this first half.
Among the more successful revenue measures we took so far, I would highlight repricing, reducing cash holdings, smart credit growth, leveraging the capabilities of our derivatives toolbox, and the increase in higher value mandate penetration. Revenue improvements are expected to come from the strengthening of our market-specific product and service offering, like, for example, the move into real estate advisory here in Switzerland we announced this morning, as well as further increasing our focus on serving the ultra-high-net-worth client segment. In terms of the cost saving measures, of the targeted CHF 200 million in cost savings over three years, we achieved close to two-thirds, approximately CHF 130 million in 2020. In the first half of this year, we achieved a further CHF 50 million on a run-rate basis of which, again, is around a quarter already reflected in the P&L.
The main reductions this year and last year resulted from resource optimization, which continued both in the front and in the back office, as well as from the ongoing internalization of formerly external staff, and last year also from the sale of our Bahamas bank and the restructuring of our operations in Montevideo. We expect that essentially all productivity and efficiency measures will be finalized by the end of this year. Last year, we indicated that these measures would entail one-off reduction costs of around CHF 60 million, and that estimate remains unchanged. We used CHF 45 million in the first 18 months of the program, and the balance will likely be used entirely in the second half of 2021. Moving on to the balance sheet. The balance sheet remains solid and liquid, with a relatively low risk profile compared to the wider banking sector.
This reflects our strategy, focus on wealth management, as well as, of course, our continued conservative, intelligent balance sheet risk management. Since the end of 2020, the loan book grew by 8%, mainly on Lombard lending releveraging, which more than offset a slight reduction in mortgage lending. At the same time, deposits went up by 3%, and as a result, we have still a healthy loan-to-deposit ratio of 64%. Moving on to capital. Since the start of the year, the CET1 ratio increased by almost 2 percentage points to 16.7%.
CET1 capital build was CHF 400 million or 13% following the strong increase in net profit, as well as CHF 75 million positive FX translation differences, which comes mainly from the rise in U.S. dollar and the Brazilian real, and the CHF 59 million positive pension obligation remeasurement, and despite the CHF 146 million we already spent on the new share buyback, and as well, of course, the higher dividend accrual in line with our dividend policy. Risk-weighted assets went up by CHF 300 million, mainly on the back of a CHF 200 million rise in credit risk positions following the growth in lending. At these levels, Julius Bär continues to enjoy a very strong capital position with a very thick cushion above the regulatory floors. With this, I have come to the end of my part, and I hand back to Philipp.
Thank you very much, Dieter. Today, we stand exactly at the midpoint of our three-year strategic plan, which we defined in 2020. As you recall, we built this plan around three tenets: the shift to sustainable profit growth, sharpening of the value proposition, and accelerating investments. Alongside that, we have made significant progress in our efforts to resolve the issues from the past. I can state with confidence that today we operate from a position of strength, and I would like to highlight three dimensions that are particularly relevant. First, Julius Bär has a highly focused, high-quality business model. We have a unique focus on wealth management, and we are totally dedicated to high-net-worth and ultra-high-net-worth client service. This means that we can be truly client-centric and avoid the complexity of broader and more integrated financial services firms.
We also have a strong geographic focus on our core markets. We continue to drive critical mass in these markets. This focus gives us resilience, as we have proven last year when we had to arrange within a few weeks for more than 90% of our staff to work from home. Also, our infrastructure has become more scalable. On certain days in the first quarter of last year, we processed almost five times the normal daily average of transactions, and we were able to handle those frequencies with no interruptions to the business. Second, we have completely renewed our risk framework and invested substantially in a strong risk culture. These efforts range all the way from the top, from the risk tolerance framework, to Know Your Client, including the Atlas program and anti-money laundering.
They also include the implementation of a front risk management function, new relationship manager onboarding procedures, client risk ratings, as well as last year's introduction of a new code of ethics and business conduct. We are well advanced also on our journey to resolve legacy issues. In the first half of this year, we reached a final agreement with the Department of Justice in the U.S. on FIFA matters, and on 31st of March, FINMA, the Swiss regulator, lifted the ban on large-scale transactions that it had imposed on us in 2020. These are important milestones that show that we are on track in closing our remaining regulatory and legal matters in cooperation with the competent authorities.
The third element I want to highlight, and it is for me truly a highlight, is that we have accomplished a substantial shift to sustainable profit growth over the last year and particularly over the last six months. This is reflected obviously by our adjusted metrics and targets externally and internally, but very concretely, it is reflected by the relationship manager compensation model. We have delivered a groundbreaking compensation model that combines client centricity, entrepreneurial elements, and a strong focus on risk management. The model had been rolled out to six jurisdictions in the last year and is already being rolled out in 11 more jurisdictions this year. This will put 95% of our relationship managers on this new model by the year-end 2021. This will also allow us full rollout by 2023.
In all of this, we only saw marginal losses of clients and of relationship managers. More than anything, it has already resulted in a strong change in behavior that has positively impacted our revenue dynamics. We are seeing this in pricing, we are seeing this in cross-selling, we are seeing it in the adoption of better sales processes and in the use of a broader set of solutions and revenue sources. All of this together is leading to increased predictability and manageability of our revenue line. Together with our work to establish a sustainable cost base for the future, this creates room for reinvestment and provides the economic foundations for our future success. This position of strength I just described enables us to focus on value creation, and as always, we start with our clients. Our approach to clients is crystal clear.
We put clients at the center of what we do. We start with personal relationships and with personal interaction, and we use technology and processes to make human advice scalable. This approach was accelerated throughout the pandemic and has been further enhanced in 2021. We are investing approximately CHF 100 million in digital tools and infrastructure this year just to take our signature private banking experience into the digital age. I'm very pleased that our efforts are being noticed in the industry, and we have just been named the best digital innovator of the year by Professional Wealth Management, a magazine published by the Financial Times. Let me show a few examples of the upgrades to the client journey that we have made this year. First, in opening the account.
This is obviously the critical step when onboarding the client. We have delivered digital onboarding with video identification and electronic signatures in Switzerland, and are about to do that in more client domiciles. This is not about an industrialized procedure, but about an individual and assisted process, and it will maximize speed while still preserving a private banking experience, enabling it through digital means. Second, advice is at the core of what we do, and it has to be personalized, timely, and holistic. To that end, and continuing a long series of investments about which we have talked before, we have now rolled out our Digital Advisory Suite, DiAS, in Asia. This unified and now global system brings together our open architecture, our client preferences, but also regulatory technology.
In this way, it gives back quality time to relationship managers to spend time with clients. When delivering solutions, we have greatly expanded our capabilities. Let me give you a few example. This starts in private markets, where we have hired last year a direct private markets team and continue to drive our fiduciary private markets activities. We have now established this year a broad deal pipeline that gives our clients even more access to a greater depth of opportunities. As we announced today, we have added a new real estate advisory capability for Swiss property investments, a highly relevant asset class for private banking clients and naturally extending our capabilities. We are also working on further exciting additions to our offering in the months ahead.
Finally, in that critical last mile to the client, so to speak, we have created new ways to stay connected, creating two-way communication and truly networked interactions with our clients digitally through secured WhatsApp channels in Switzerland and in Asia, where we have also piloted the local WeChat version of this. We are deepening connections with and among our clients through investments in communities. These are only a few and recent focus areas of continued investments in the value chain that make our client experience both uniquely personal, but also scalable at the same time. Creating value for our clients is the prerequisite to create value for shareholders. Our emphasis is on creating sustainable value for investors by specifically addressing four factors: revenue quality, the rebasing of our cost structure, growing our asset base smartly, and actively managing our balance sheet and capital.
We focus continuously on revenue quality, for example, through the adoption of discretionary mandates and fee-based advisory service models, and we constantly enhance revenue sources by introducing new capabilities, which we have just highlighted before in private markets or real estate. This also includes a strong emphasis on pricing. We have been able to successfully implement strong discipline and value-based pricing over the course of the last few months. In order to rebase our cost structure, we have already initiated or implemented all measures leading to the targeted cost reduction of CHF 200 million by the end of 2022. This will create the basis for selective investments in growth in the future. We do focus on smart growth of assets under management, essentially the raw material of the revenue generation.
By this, I mean capitalizing on a combination of sources, from higher share of wallet with existing clients, to client referrals, to new client acquisition, and ultimately, to the hiring of new relationship managers, especially in core markets. We've seen a great contribution of all these sources in the first half of this year. I'm confident that this momentum will accelerate with the easing of the pandemic travel restrictions and the restrictions on face-to-face meetings moving forward. Last, our strong balance sheet is critical for our investors and for our clients alike. This is reflected in the disciplined and consistent growth of our credit business, especially with ultra-high- net- worth clients who we assist and advise also in sophisticated transactions. At the same time, we are maintaining a conservative risk profile, as risk-weighted assets have been growing less than the balance sheet, as demonstrated in Dieter's presentation.
We have proven our reputation as a high-quality issuer with the strong demand for our unsecured bond issuances in March and June, but also the Moody's rating upgrade just last week. The value we create for clients as we help them to grow, protect, and pass on their wealth is at the core of what we do at Julius Bär. Our ambition does not stop there. We think broader than that, which is why we have explicitly made it our purpose to create value beyond wealth to the benefit of all stakeholders. As of 2021, we have articulated three core pillars to support our purpose: enabling families and the next generation, understanding and shaping the future, and taking responsibility as an institution.
Julius Bär already serves many families, we are a family business in our roots ourselves and intimately familiar with the challenges of dialoguing and transitioning across generations. We help families navigate the complexity, advising them today with our family office services, also supporting generational change through succession planning and education, for example, through our Young Partners program. We have also made a conscious decision internally to accompany families with the next generation of relationship managers and of experts on our side. The second pillar of going beyond wealth management is about understanding and ultimately shaping the future. As we say, how we invest today is how we live tomorrow. The world is at a critical junction with respect to sustainability, also technology. We want to understand these developments and help our clients make educated decisions, educated choices.
We strive to understand mega trends through our own research, but also partnering with world-class pioneers and platforms in the relevant fields. Examples include our long-standing investments in the future of mobility and Formula E, but also now our association with Nico Rosberg and the GreenTech Festival, which operates at this intersection of technology, entrepreneurship, and sustainability. We will drive ecosystems and ultimately want to co-create content together with our clients. The third pillar is taking responsibility for us as an institution. We have a long tradition as Julius Bär of contributing to society and to communities, and we use many platform to do so. Two examples are the JB Foundation that is running roughly 30 projects in the areas of replacing plastics and addressing wealth inequality. JB Cares is a grassroots employee engagement platform facilitating, among other things, employee volunteering.
All of these pillars and initiatives have a single objective, to create value beyond wealth. At Julius Bär , we recognize the role that the financial industry needs to play in transitioning to a more sustainable and equitable world. Our ambition is to empower clients and employees, but also wider stakeholders, to make a positive and measurable impact on the world. To that end, we have established a holistic and integrated sustainability framework. This brings together two sides. On the one side, responsible wealth management. This is about accompanying clients on their personal sustainability journey, helping them understand the world, make educated choices also in this area, and realize their choices with the right solutions. The other side of the framework is responsible citizenship. There we as a company walk the talk.
We integrate sustainability in our core processes, we take responsibility as an employer and through our community activities, and we chart the path towards CO2 net zero as a corporation. Right now, we have three sustainability priorities very much focused on our clients. The first is about creating transparency through research, but also through integrated sustainability reporting. The second is about delivering education to clients and staff alike. The third is about building ecosystems to drive solutions and connections through content. There have been many great highlights just in the first half of 2021. We have published Earth Matters, a thought leadership publication on impact investing. We have delivered a pilot for ESG reporting that will be fully deployed at the end of the year. We want to make it transparent for clients what is happening in their portfolios as basis for action.
We drive ESG learning suites for our staff and a certification for our experts. We have delivered a range of new impact investment solutions, and we're just about to launch an impact community for our clients in the second half of this year. There is more to come. Sustainability continues to be an important focal topic for Julius Bär , and one that I am passionate about. Let me finish with looking ahead to the second half of 2021. We will continue to be focused on creating value for clients and shareholders through wealth management and beyond. Not just for those groups, actually for all stakeholders. Julius Bär has always been a bank that prides itself on personal connections with clients. We have maintained these connections very successfully in virtual mode over the 1.5 years of the pandemic.
Now, as it gradually becomes possible to reintroduce physical touchpoints, we will be able to combine the best of both worlds, digital and physical, to take our acquisition efforts and our service efforts to the next level and have even closer relationships with clients than ever before. Products and solutions play a key role in our commitment to innovation. We are looking forward to a series of highlights in the next half year. As mentioned earlier, we're building a real estate advisory capability just about now. We are also introducing M&A advisory services for our ultra-high- net- worth clients. Stay tuned for more information about that in the second half. We are driving the enhancement of our sustainability and impact investing platform. On top of that, we have a number of exciting ideas on how clients could benefit from the opportunities in the digital asset space.
From an investor perspective, our laser-sharp focus on strengthening client relationships and innovating our offering will broaden and further diversify revenue sources. This, together with our continued emphasis on pricing and the finalization of our cost program, will give us the room for targeted investments into future growth. Let me close with two important priorities beyond wealth today. Our employees are critical for our success. We want to remain the employer of choice in wealth management. To recruit and to retain top talent, our strong employer brand gives our people entrepreneurial freedoms to make a meaningful difference. We promote a diverse and an inclusive workforce culture that will translate into even better commercial outcomes. We are introducing young talent to the value chain very consciously through our graduate and junior relationship manager programs. The other priority lies in how we will work in the future.
On a tactical level, we will begin experimenting with new, flexible ways of working, combining working from home with working from the office in a way that creates better outcomes for all stakeholders. On a strategic level, we are running today two very successful agile pilot programs involving already a substantial part of the organization. Through these programs, we will gradually scale up faster and more agile delivery of client-centric innovations. Both our people and how we work will determine our ability to stay at the forefront of wealth management and shape the next decade in our industry. Based on our strong performance and the shift that we've made to sustainable profit, we are entering the second half of this year from a position of strength and with a lot of momentum. We are already working on what's next.
With this, ladies and gentlemen, I would like to conclude my remarks and open up for Q&A.
We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star one on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star two. Participants are requested use only handsets while asking a question. Anyone who has a question may press star one at this time. The first question comes from Jeremy Sigee from Exane BNP Paribas. Please go ahead.
Good morning. Thank you very much. I just have two questions, please. The first one is on the buybacks and the capital ratio. You're four months in, and you've done a third of the buyback program. I just wanted to understand how you're thinking about, you know, the program versus the capital ratio, which is well above your targets. You know, is your expectation that you'll complete the CHF 450 million program by the end of February? Could you do more than that given that you're above the capital ratio? Just how you're thinking about that. That's my first question. Then the second question, you're indicating that you're near the end of the cost cutting process that you've been through, and there's a little bit more emphasis here on growth and investing.
I just wondered if you could talk a bit more about what that might look like, in a practical sense in terms of, you know, do RM numbers start to go up again now? What sort of growth investments might you be making? That kind of thing. Just paint the picture for us a little bit, please.
Shall I take the first one?
Yes.
Thank you. On the share buyback, of course, we will run the program to the end, which is actually by the end of February. The full 50 and then the Board's before the announcement of the full year figures will have to decide whether or not to start a new program going into 2022. On the growth question, we have always had a growth strategy. Even with the shift to sustainable profit growth, obviously the word growth played a role in that. You see this also reflected in, let's say, the ongoing ability of Julius Bär to generate substantial net new money. We're growing today in the old target range of 4%-6%. As to the future, I think we will create the prerequisites for growth in all the different dimensions.
We will continue to work on share of wallet and on expanding our existing network. Obviously, we have always been hiring relationship managers, and we'll continue to do so in the future. We might do so in an accelerated way in markets where we see specific opportunities. Obviously, ultimately, I think M&A over the course of the next few years might also be a component, one side of the middle of that growth. Growth obviously has always to happen profitably, and it has to happen in the right quality, and so we will be very focused in the investments that we make.
Thank you.
The next question comes from Izabel Dobreva from Morgan Stanley. Please go ahead.
Hello. Good morning, everybody. Thank you for taking my questions. This is Izabel Dobreva from Morgan Stanley. My questions are actually also on costs and the buyback. Let me maybe start with the costs. Looking at the savings you announced about a year ago, the CHF 200 million, you're pretty much on track to achieve them by the end of the year. I am wondering, do you see scope for another program next year, but also where are you on this digital journey? Is the bulk of the investments now done, or do you envisage to continue this level of spending on the digital side? Then on the buyback. Your capital ratios are very strong, and also keeping in mind your return target of over 30% and the role that capital return might play in achieving that.
Would you consider increasing the buyback or potentially executing it faster, or would you consider paying out a special, for example? My final question is on M&A. The ban has now been lifted. Could you update us on your M&A strategy in terms of size, but also what product suites and markets you might be interested in acquiring? Thank you.
Thank you, Izabel. I'll take the first and the third question. I think on the cost side, we've always said that we want to look at productivity from an integrated perspective, from a revenue and from a cost side. We have therefore driven 2 different programs now already strategy cycle. I'm very glad to see that our Cost Program is very far advanced, by the way, the Revenue Program too. I expect that our Structural Cost Reduction Program will be finished at the end of this year. Obviously, ongoing cost management is an important priority in our business, but I do not foresee at this stage a need for a structural program as we go again into 2022. When it comes to investments in digital, I do believe that we will have to maintain a substantial level of investments moving forward.
I think this is a constant race. It is, the set of opportunities is constantly widening. We have said that we want to be the most digital bank for our relationship managers, and we have still plenty of opportunities to go, even though we have come a long way. Obviously also the requirements of our clients are constantly changing and evolving, and we want to make sure that we can meet the expectations at that front too. We will continue to substantially invest in technology also in the coming years. Hopefully, doing it even smarter and even better, for example, through our agile program.
As to the M&A strategy, as I just said before, I think M&A is just part of an overall growth strategy and has to be seen in this context as one approach to driving profitable growth for Julius Bär moving forward and driving critical mass. We would be mostly looking at our core markets as we do with everything that we do, where we want to further add to critical mass and to economic profitability. It is about quality of the targets. I think after all the investments we have made on the compliance side, on KYC and AML, obviously we need to acquire high-quality targets. It's also about cultural fit, which is most important, and ultimately about the right price.
I think in that area, maybe patience is a bit of a virtue, but we will be ready for the opportunities that the market will give us in the few years to come.
On the second question, come back to the program, share buyback program. Dividend payout or the payout in total is more a yearly cycle. When the full year results are debated in the board, he will decide on dividend, and as I said before, whether or not to launch a new share buyback program. It's too early mid-year to opine on this.
The next question comes from Kian Abouhossein from JP Morgan. Please go ahead.
Yes, thanks for taking my two questions. The first one is related to advisors. Your advisor numbers are declining, and I just wanted to see how you're thinking about advisor hirings going forward, not just this year, but also in the future, so more longer-term trends, and in what regions in particular, and how you see the competition developing in advisors as we see from other banks, quite aggressive hire advisor strategies, both in Europe as well as international. The second question is if you could give me a split of your assets under management between affluent, high-net-worth and ultra and how you see the change in usage of technology. More of a longer-term trend.
You're clearly focusing on some of the younger generation, and I'm quite interested, how they're using, or how the next client base that you're targeting is using technology and how you're competing with that with some of the more fintech-type players that are coming into the market. In particular, if you can give me the split and discuss a little bit the different usage by client base.
I'll try to take a stab at the four questions and Dieter will further add to it. Let me first start on the advisor numbers. I think the development of the advisor numbers, even right now, is obviously a net number which has a gross plus and a gross minus underneath. We have been hiring actually over the course of last year and the course of this year, and we will continue to do so. This is important. I think this has been a conscious decision as we laid out at the beginning of last year to identify a bit our business and to make sure that we drive concentration and critical mass also at the level of relationship managers.
We have been very stringent in terms of performance management over the course of the last 18 months. I would not foresee a further strategic or systematic decline of the number of relationship managers moving forward, but I think rather a very conscious development of the number in the other direction in the next few years. Very conscious means also that we will always look at profitability. We will be highly selective in growth, and we will not set ourselves a specific hiring target for relationship managers at this stage. When it comes to competition, yes, there is high competitive density out there. I believe Julius Bär is one of the most attractive employers in this space. This is due to the nature of our business and the focus of our firm.
The reason why clients want to join Julius Bär is also the reasons why relationship managers want to join us. I think our excellent relationship manager compensation model is adding to the strength of our employer value proposition. I think we have good cards. Even in terms of developing workforce, we are using different avenues. We're obviously hiring existing proven talent in the market, but we're also very consciously developing young talent ourselves with, for example, the junior relationship manager programs in order to complement our business moving forward. With respect to the segments, I think both ultra-high-net-worth and high-net-worth clients play a key role.
The last published number was still CHF 150 billion in ultra-high-net-worth from roughly a year ago or a bit more. I think this has been growing since. Ultra-high-net-worth clients play an important role, but they're not the only segment of Julius Bär. I think we have a very good balance between the two ultra and high-net-worth . Julius Bär is not focused on the affluent segment. We have a capability, obviously, sometimes to serve also smaller clients within a restricted frame, but our core focus is clearly there on high-net-worth individuals. Technology plays an important role, but one has to see this in a very differentiated way.
I think there is a technology obviously at the interface with clients in communication, and this also includes e-banking capabilities, and we have been constantly expanding on that and will be doing so in the future. On the other side, do we aspire a digital leadership at the level of the client interaction? No, we don't. Because we believe that other firms out there in the market are much better positioned to do this. It plays to our favor that our clients accept to have sometimes multiple relationships in the financial service industry, allowing them to play exactly this angle in a very specific manner while retaining a holistic perspective together with us. I think this is, there's a differentiated way that we approach there.
There's also a way, obviously, to cater to technology-affine clients through our research, through next generation, another level of technology, through our views on the digital asset side. I think on those topics, Julius Bär is clearly on top of things and can offer a strong ecosystem and strong insights to our clients as we go forward.
Very helpful. Thank you.
The next question comes from Nicolas Payen from Kepler Cheuvreux. Please go ahead.
Yes. Good morning. Thanks for taking my question. The first one would be on mandate penetration and recurring fee income margin. I can see that your recurring fee margin has actually increased slightly versus the end of 2020, but yet your advisory mandate has slightly decreased. You have always actually said that mandate penetration was one tool to protect your margin. If you could actually develop on that trend. The second question will be on Kairos. If we could have a quick update on outflow, for instance. Maybe a very last quick question. You just touched upon digital assets, and I wanted to know, beyond research that you offer through SEBA Bank, what kind of services you would be ready to expand to your clients going forward.
Thank you very much.
I'll leave the first one to Dieter.
First on Kairos . The outflows came to an end as of May. May, June were positive already. The business is running quite okay. They're now at around CHF 5 billion, a bit more than CHF 5 billion. In terms of the recurring fee, as you say, the recurring fee in terms of basis points contribution went slightly up. Even the penetration of discretionary mandates, for instance, is stable. There is a shift from, as I said, from more basic mandates into value-added mandates, which yield a higher benefit to us and also to the clients, and therefore the absolute contribution and in terms of basis points is going up again. For the first time since about two years.
This trend, this is a focus area, as Philipp explained in his part, and so we're working on this to have this trend more sustainable into the future.
With respect to digital assets, obviously, it starts with research and with information, but I think there are four areas that are important for this. The second area is creating a participation in economic performance of what is happening in the crypto space right now. Even though this is and cannot be part of an asset allocation today, I think still clients are looking for access into this market in a self-directed manner, and this is some an area where we can help them. It is about supporting sophisticated private banking clients who have access themselves into the crypto space with creating an interface to the fiat world and taking a broader, more holistic perspective of those activities. We have such clients.
Last but not least, this is maybe the biggest potential for me, is the transformation of finance in the medium of long term with the DeFi possibilities, with the possibilities for programmable finance. For example, what's possible on the Ethereum blockchain, smart contracts, the replacement of cumbersome, historic banking products through those. In this field, we as an enterprise need to be on top of technological developments. We need to experiment with them early on to create new value in our value chain. This is also what we're doing.
Thank you very much.
The next question comes from Anke Reingen from Royal Bank of Canada. Please go ahead.
Yeah, thank you very much for taking my question. The first is just on your targets and your performance shown on slide 25. Obviously, the targets don't look as ambitious, just looking at the recent performance. Do you think it's also given you're quite close to delivering on your strategy, revenue, and cost synergies? Is it already time to review your targets when you report for your results, or just basically thinking that they still stand and the last half year was benefited from or the last year benefited from the strong markets? Secondly, on the NII, I think I heard you saying that the exit margin was 13 basis points. I'm just a bit surprised, given the strong loan growth.
Would that have already helped the 13 basis points, or is it just basically a function of NII not growing as fast as the AUM? Thank you very much.
Let me first answer quickly on targets. I think I remember our conversation 18 months ago, where our target set actually was considered very ambitious by the market and in the discussions. I think, with hindsight at that time, it had still been. Obviously, we have been delivering a very strong transformation throughout that time. We have greatly advanced our business. Of course, also we've been operating under market conditions that have allowed us to achieve these targets and to exceed them now by midterm of our three-year strategic cycle. Still, our ambition has to be not just to deliver this at a certain point in time, now mid-2021, but sustainably and repeatably over the cycle and beyond.
In that sense, it's important for us to continue sticking to those targets over the cycle. We'll be looking obviously for the next cycle into a different set of targets.
Yes, on the second one, you don't have to forget that we have the base effect of Q1, when in U.S. dollar, the rates in 2020 were much higher. This now comes through as a negative, or came through in Q1 of 2021. As you mentioned on the positive side, certainly the average larger lending book contributed positively to the NII. These were the two main factors playing into that. Since the Q1 of this year, in terms of basis points contribution, it's more or less flattish. The exit margin is more or less the average of the half year.
The 13 basis points includes already the benefit of the strong loan growth?
Yes. Yeah.
Okay, thank you.
The next question comes from Andrew Lim from Société Générale . Please go ahead.
Hi, good morning. Thanks for taking my questions. Let's just circling back to the cost question. Now that you're reinvesting for growth, can you give us a bit of color on how you expect the absolute cost base to grow annually? Should it be about 5% annually a year, for example, or maybe a bit more or a bit less? The second question is on investing for yield. If I look at your risk-weighted assets to asset density, it's reached quite a low level, below 19%.
The last time this happened was in 2018, and it was a precursor for you investing in high-yielding assets in your treasury portfolio and building out your loan portfolio. Then your credit risk-weighted assets grew quite sharply. That put a bit of pressure on your CET1 ratio. I was wondering if you're thinking along similar lines now, given the similar situation.
Yeah, let me first take the second question. I mean, first of all, I think we have clearly enhanced the management of the risk-weighted assets. Steering, for instance, on the lending side, the relationship manager do the right kind of collaterals against the lending to the benefit of lowering or optimizing the risk-weighted assets. That has improved. It's also partially linked to the front compensation program that is rolled out now to all of the RMs in this year.
The second is we had compared to previous years, less credit bonds, so less corporate bonds in the treasury portfolio towards the end of the period, which of course also helped the risk-weighted assets as asset density is higher than on the loan book lending.
So, so, uh-
Yep. Sorry.
No. Sorry, sorry. Do you envisage continuing with a lower credit bond exposure going forward or do you see the opportunity to?
This obviously depends. I mean, on the treasury side, as you know, over a longer period, we are investing according to the market situations. With credit spread at a record low, we felt it's not the right time to reinvest. This can go up. We can invest again more on the credit side and of course that side would contribute more to risk-weighted assets. We more optimize the usage of the risk-weighted assets and not the absolute level. I think that's the answer to your question.
No. Okay.
On the first question in terms of the underlying cost growth, we always said there is about underlying 1% inflation in the cost base, both on the personnel expenses and on the general expenses. Of course, on the personnel expenses, it depends also on the top line. If the top line goes up, then the performance-based contribution or accruals get up, and then we still have some upper pressure on amortizations and depreciation coming from the increased investment in technology over the past few years, where now the amortization comes through over the next few years. Of course, that's relatively small in absolute terms.
The growth investments will happen in that context. I don't think we have to give, at this stage, a specific guidance to it, but it will happen within the framework of our overall objectives.
Yeah.
I mean, it sounds when it sounds when you put the balance of those components together, that the cost growth should be lower than your revenue growth in a normal kind of market. Would that be a fair assessment? That being the case, should you expect the cost-income ratio to still trend lower?
I mean, with the caveat of additional investments we do, if you would hire, let's say, again, over proportionally a client relationship manager, then I think that's a fair assumption, yes.
Of course. Okay. Thank you very much.
The next question comes from Stefan Stalmann from Autonomous. Please go ahead.
Yes. Good morning, gentlemen. Thank you very much for taking my questions. The first one relates to your acquisition, Kuoni. I was wondering if it's realistic to expect as a result of this acquisition that you will actually write more mortgages again. That has been part of your loan book that has been declining for years. Should we expect this to reverse? Maybe also, should we expect more interest in structured lending opportunities as a result of this acquisition? The second question, you know, goes back to your treasury. Has the duration of your book changed in any material way during the first half of the year, please? Thank you very much.
I think on the first question, I think obviously looking at real estate as a complex, this is something that we have been doing for many years now. We've always been active on the financing side. You've mentioned the two sides of it, the mortgages, but also the structured lending side. Yes, indeed, there could be some impulses coming from that acquisition, also a broader range of services that will translate into more service revenues. This is a broader set of activity than just a tool for lending growth, it's a natural continuation of the investments in specific services. Now, first, especially in a Swiss strategy context, but also internationally.
Still I would expect this bigger focus on real estate as an asset class in the firm here in Switzerland. There should be at least a leveling off of the Swiss mortgages as to your question. On the, on the second, on the bond portfolio, it's a bit different currency by currency. On the U.S. dollar bond portion of the bond portfolio, we lengthened a bit the duration. It's now up to three years from two and a half by the end of last year. On all other bonds, we shortened it to two years, down from two and a quarter years.
Great. Thank you very much for that.
The next question comes from Piers Brown from HSBC. Please go ahead.
Yeah. Good, good morning. Actually, a lot of my questions have been asked, but I might just come in with two small follow-ups. Just on coming back to the question on mortgages, I mean, can you just give us a little bit of color as to what was going on in the first half? You've obviously seen a 3% contraction in the book, which just looks a little bit strange given, you know, we've seen very high activity levels generally in real estate markets. If you could just talk to what specifically caused that decline. Maybe just to follow up on the question around exit rates for margins. You, you've talked about the NII trend, but just more broadly on the gross margin.
The 81 basis points you mentioned for the second quarter, I don't know if you can give any further granularity as to what that looked like as you exited the quarter and what you're actually seeing, sort of real time and times in terms of client activity through the summer months? Thank you.
Thank you. On the mortgages, I mean, it's, as you say, the real estate market also in Switzerland is very hot. Price is increasing, a lot of transactions. It's nothing particular happened in our book. We had a repayment of a few larger, relatively speaking, loans, and that's all. We provide mortgages to clients. We do not stand alone mortgage lending here in Switzerland, and so that continued on a healthy basis, but it was offset by these larger transactions that were repaid. On the gross margin, I mean, the only granularity I said is the around 13, a bit higher, basis points contribution from net interest income. The rest, I think we all commented.
Activity level went down, clearly as indicated in Q2, also in line with volatility in the stock market. The recurring fees, as we indicated before, are trending slightly up.
That's great. Thanks very much.
The next question comes from Daniele Brupbacher from UBS. Please go ahead.
Good morning. Thank you. Briefly on Lombard loans, I mean that book grew quite nicely in the first half, I think 11%, CHF 4 billion or so. Can you talk a little bit about the drivers behind that? Is it the yield curve? Is it the market sentiment? Probably by region as well, if you can give some indication. Lastly, on Lombard loans, what was roughly the impact on net new money overall? The second question. You mentioned the new compensation model, which I think is quite important and linked to economic profit. You did say, Philipp Rickenbacher, that this had a positive impact on revenues. Can you quantify that and are you ready to share that with us in terms of what impact that had?
Did it also have an impact on net new money? You make this interesting remark on one of the slides that about half of the flows came from advisors that joined there before 2018, just out of interest. Thank you.
Thank you. Let me start with that question. It's very interesting. I believe the answer is yes, it had an influence also on net new money. Even though I think net new money is weighted in a different way today in the model than in the past. It is essentially just an add-on element or a kicker under a condition of excellent conduct rather than just a factor. I think it still provides obviously sufficient incentive for relationship managers to keep growing their books, also in light of having the raw material for further revenue generation. I think there's a whole logic to it that is embedded in the model. It's hard to quantify the specific impact on the revenue side of the model.
I think that's obviously very difficult, as we've been doing different things around this topic of managing revenues and making it even more predictable. I mentioned the efforts around pricing. I've mentioned the new solutions and the possibilities that we gave to clients and to relationship managers to broaden the revenue base. But I do believe that the new model was a critical it is a critical enabler on that journey. It has given the right incentives, it gives the right direction. It gives also the right degrees of freedom, for example, to tackle less profitable client relationships, because there is no fear of asset loss essentially embedded in this model. These freedoms have been used amply by our relationship managers.
We've seen those on the pricing side very active in the last 12 months. I believe it's an absolutely critical enabler on that, on that revenue journey.
On the Lombard lending, you're right. It's largely based on the positive sentiment. It's not only positive sentiment towards the stock market, but also about the real economy. It contributed about 20%-25% to net new money on a net basis. Most of the lending is for investment in our, or a lot in our portfolios. Also entrepreneur that took a Lombard loan against portfolios they have with us, but invested back into their business, which is also, as I said, a show, a sign for the positive sentiment in the economy.
Geographically, it's obviously the largest chunks coming from Asia and Europe, but also Latin America catched up quite a bit in the first six months.
The next question comes from Hubert Lam from Bank of America. Please go ahead.
Hi. Hi, guys. Good morning. I've got three questions. Firstly, on the trading margin. We expect trading margin to fall from recent peak levels. As you have already seen in the latter part of the first half. Do you expect trading margin to go back to pre-COVID levels in 2019 or do you expect it to stabilize higher than that going forward? Second question is on cost income ratio. If the gross margins stabilize at a lower level, say below 80 basis points, if its activity slows. Will you still be able to achieve a cost income target of below 67% in 2022? I think the cost income target was set when gross margin was higher. Just lastly, a follow-up question on M&A.
In the past, you've mainly focused on M&A mainly on other private banks. Would you consider M&A in asset management as a consideration? Thank you.
Thank you very much. I think I'll give a casual answer on the first and second, and Dieter can jump in, and then I'll focus a bit on the third. In terms of trading margin, no, I would not foresee this to just drop back to pre-COVID levels. We are operating in a completely different economic cycle today than we were at a pre-COVID timing. There has been, I think, a structural element to it. Obviously, the degrees, they might vary. I think on a cost income ratio, we should be able to make our target.
I think that's important that the target again on a three-year cycle but also beyond that is the structural work that we're doing, balancing the cost revenues but also the qualities of the revenue, so that over a cycle and under different market regimes, this, the target cost income ratio that we set, can be achieved. As to M&A, I think we have been I've said this at the beginning, we operate a very clear and a very focused business model. We are truly focused on wealth management and serving clients, and this will also be the basic tenet for our business moving forward. This does not mean that we cannot have certain solution skills along the way, and it is actually very important that we have them.
The acquisition we announced today in terms of real estate management and servicing is an important little mosaic stone in that direction. I could imagine more additions also on the product services and solution side moving forward, but we would only do it with a complete focus on wealth management and on serving our private clients. I think if it doesn't fit this lens, then this would not be beneficial to the footprint of our business.
Great. Thank you.
The next question comes from Nicholas Herman from Citigroup. Please go ahead.
Oh, yes. Hi. Good morning. Thank you for taking my questions. I have three short questions, please. The first is on Asia, and then the second and third are kind of clarification on cost and. On Asia, which you call your second home market, 20 some % of your AUM is from there. I think an
Apologies.
Rate or even fast.
Yeah.
Hello, can you hear me?
Yes, but on/off. Please try again.
Oh. I'll try again then. It looks 27% of your AUM is from Asia. I'm guessing it looks like your larger peers have been growing at about 7% per annum. I'm guessing you're growing at a similar or even faster rate. I guess that would imply something in the range of 1%-2% growth across the rest of the franchise. Where is that drag coming from? I'm guessing LatAm. Is there any other places? And when do you expect that drag to fade, so we can see the full benefit of Asia net new money? Also on China, when we last spoke in February, you announced your partnership with the Beijing Wealth Management Institute. There were also reports that Julius Bär is looking to enter China via a JV.
Do you have any update there? In terms of the clarifications on cost, can you give us a sense of how much higher variable comp was in the first half versus the second half of last year? On pace, can I just clarify what you mean by higher value mandates? Can I just confirm this is not just, let's say, equity mandates because of markets have been rising? I just wanna make sure that I've properly understood the definition here. Thank you.
Let me take the Asian half of the question, or the global growth footprint. Yes, indeed, as we said, we have been growing strongly in Asia but also in Europe, but also in the Middle East. We obviously always take a portfolio approach globally to growth. I think in LatAm over the last few years, as we've communicated, I think a lot of restructuring has been going on. If one dissects the result, actually, also at this stage, I think turning to a positive contribution overall. Then obviously, let's say some elements of growth are still superposed with some, let's say, conscious outflows in the region.
I would say by and large, the restructuring in LatAm has been completed or will be completed shortly. Already our growth efforts in the region, for example, around selective hiring of RMs or the opening of the Brazil advisory office at the beginning of this year, I think we will be seeing the effects of that growth coming through and the contribution of the Americas therefore also to increase. I think that's the overall global strategic view. As to Beijing International Wealth Management Institute, I think this is an important stepping stone for us, one more into the Chinese markets.
It gives us insight, it gives us relationship building, and it allows to strengthen the presence of our brand in the region as one step to, let's say, further growth that we clearly envisage in the overall Asian region, at this stage out of our platform and in Hong Kong and in Singapore.
On the JV, I mean, are you am I right that you are looking for a partner for a JV as well?
No.
Oh, okay. Understood. Thank you.
No.
One more? One more question or no?
The next question comes from Daniel Regli from Octavian. Please go ahead.
Good morning, thank you for taking my question. If I may, maybe one question on the cost-income ratio target, then one question on net new money, then one question on the CET capital ratio. Maybe on cost-income ratio, I mean, your target below 67% by 2022, now you have 61. Obviously we're going to see some normalization on gross margin, it still seems to me kind of not very ambitious, your target. What are maybe the points I'm missing? Why should somebody fear that you could not even achieve the 67% by 2022? On net new money, obviously what we have seen is kind of a pickup in net new money during the last part of the H1, I assume that this is in relation to lockdowns.
Do you have any kind of visibility into H2 what net new money is kind of from prospect clients or, maybe net new money you would have taken in otherwise already in H1 in a normal environment? I think thirdly, on the CET1 capital, I think we all noticed that you kind of run at a high excess capital ratio, and we all know the negative impact on return capital metrics, of having a too high capital base. Do you have any kind of pain barrier in mind where you would take actions to reduce the excess capital on your balance sheet? Thank you.
Let me take a quick stab at those three. First, on the cost-income ratio, I think it is a nice problem to have that today you can almost confirm that we will be making the target by the end of next year. Still, we have to make it, I think under any given circumstance. I think this is obviously a better position right now after 18 months than as if we had conversations that we won't make it. Obviously we will continue our efforts both on the revenue side and take a conscious approach to cost also moving forward. Net new money is an interesting one because in a sense we have been operating in a non-normal environment. Non-normal because our relationship managers could not travel.
Non-normal because also the onboarding of new relationship managers is more complex in a fully virtual world. There I would foresee, let's say more possibilities as now the travel restrictions from the pandemic will ease and things will open up. Hard to give an exact timing to this. These things have typically a bit of a ramp-up phase, and I wouldn't wanna rob the crystal ball on when which country will finally open up again. But it's clear that right now we have to some extent the handbrake still on given the pandemic situation and that handbrake should be loosened at some point. As to the CET1 ratio, I think we've been alluding to this before. We are using the full potential and arsenal of bringing back capital to the market.
We take a conscious approach to managing our capital. That is an ongoing discussion with the board of directors as to when and how to manage this specifically.
Okay, quick follow-up on the capital, but just to be sure that it's not like it could be something like a RWA inflation in Basel or any other hits to the capital ratio which could threaten the capital base rather.
No, no plans. No plans in that direction. I think we've also taken always a conscious approach to RWAs. We've been growing them with or below the balance sheet, and we will not change our risk appetite fundamentally moving forward.
Okay. Thank you very much.
Last question.
The last question for today's call comes from Adam Terelak from Mediobanca. Please go ahead.
Morning. Thank you. I've got one on fees and one on trading. On trading revenues, I mean, if you look at your equities trading print, it's clearly taken a meaningful step up through the past three or four quarters from pre-COVID run rates. I wonder if you could talk about what's changed with the platform. Have you been internalizing some of your structured products trading? Is this something that we should think about being a bit more sustainable going forwards over and above the increase in volatility and the kind of the more exceptional nature of the trading backdrop or the trading environment? What's changed there and why we should be basing that on basing that into our numbers in a more sustainable manner?
Then on the fee income, we've kind of talked about the uptick in the fee margin. You've mentioned Kairos AUM. Could you just give us Kairos performance fees? I want to know if that's skewing the fee margin at all. Then could you just explain how that developed H on H, please? Thank you.
Dieter, you wanna start with Kairos?
I'll start on the second one. On Kairos, as I mentioned, I didn't mention the basis point. It's around 70 basis points on a bit more than CHF 5 billion. As you know from legislation, all the performance fees or most of the performance fees are charged by the end of the year. There is just a couple of CHF millions in the revenues, in the Kairos revenues in the first half of this six months.
As to the trading question, I think that's befitting close and last question. I think yes, indeed, there has been a lot of structural development also on the trading side, as in all our businesses, where we constantly evolve our approach. We have been growing our structured products franchise in breadth and depth. We've been further adding automation and value added also to our relationship managers, which has led to a continued development of the penetration. We've been adding capabilities on the tailored solution side. So, I think there is a, there is a big structural development also on the trading side that allows us to punch in a higher weight class year on year, as a steady underlying development under obviously the market forces which also play a role.
Is that?
And as for normal-
So is internalizing-
Yeah, please.
Is that internalizing flow from your existing clients or is that, kind of offering it further and wider to third parties?
We've been continuously using open architecture, but we've been growing internal market shares also constantly over the last years.
Great. Thank you.
Thank you very much indeed. With this, I wanna thank you very much for your interest in today's presentation, for being here with us. It's just up to me to wish you a very relaxing holiday period. I hope that you get a great break. Looking forward to talking to many of you, either right now or after the summer break, and then to pick up on the strong momentum again that we have shown in the first half year. Thank you very much indeed.