Ladies and gentlemen, a very good morning to all of you on this unnaturally warm, almost spring day out there, if the weather was a little bit better. Warmly welcome to Julius Bär's 2019 results and our strategy update today. It's my great honor to be here with you today for the first time as the CEO of Julius Bär. Without any delay, I hand over to Dieter Raemy for the results 2019.
Thank you, Philipp, and good morning from my side. As usual, in our presentation, the results are shown on the adjusted basis. In 2019, the adjustments were larger than in previous years due to the CHF 153 million provision, which we announced in December, linked to the claim by BBS in relation to events that, a long time ago, allegedly took place at Bank Cantrade, which UBS acquired in 2005 from UBS. The CHF 99 million goodwill impairment related to our investment in Kairos, which we announced in November 2019. A reconciliation is, as usual, provided in the appendix, and as of today, also in the more comprehensive alternative performance measure document on our website. Moving to page 5. 2019 was characterized by a solid recovery in the stock markets, contrasting to the decline in 2018.
U.S. government bond yields had risen substantially in 2018, but came down again in 2019. In the summer months, the U.S. curve was still partly inverted, but it showed modest steepening towards the end of the year. In the first weeks of 2020, it has become partially inverted again. A third trend worth highlighting is the continued weakening of the euro versus Swiss francs. Fortunately, our euro revenues versus euro costs mismatch is smaller than in the past, but it still had some impact. Moving on to the results, starting with the development in client assets on page 6. AUM increased by CHF 44 billion or 12%, driven mainly by market performance of CHF 45 billion, net new money of CHF 11 billion, and a negative currency impact of CHF 6 billion. Monthly average AUM, important for the margin calculations, went up by 5%.
Net new money on slide seven. The growth in our core wealth management business was 4.1%, despite some outflows related to the client documentation review Project Atlas and the wider application of negative rates on larger Swiss franc and EUR deposits. We saw excellent inflows from a number of different regions, with particularly strong net new money coming from our business with clients in Asia and Europe. Overall net new money was 2.8% as a result of outflows at Kairos. As we highlighted during 2019, the Kairos outflows initially followed the underperformance in 2018, and were subsequently driven by a number of key manager departures in 2019. On page eight, operating income. They were essentially stable at CHF 3.4 billion. Commission and fee income was up 1%.
Recurring fee and commission income increased by 1%, as the benefit of higher average AUM was partly offset by a somewhat lower contribution from Kairos and modest fee pressure on non-bespoke discretionary mandates. Transaction-driven income was slightly down. Before I continue with the other income lines, it is important to point out there was a realignment between net interest and dividend income and what used to be called net trading income to bring it more in line with common market usage. As a consequence, we will show new line items, net interest income and net income from financial investments. In the appendix, we have 4 slides showing the changes. The results for 2018 have been realigned accordingly. Net interest income in the new aligned format declined by 2%.
This was the result of an increase in interest income from loans at higher average rates and an increase in interest on the treasury portfolio on higher average volume despite the decrease towards the end of the year. These two positives were more than offset by an increase in the costs of deposits following the increase during 2018 in USD non-current accounts. Net income from financial instruments declined by 4%. This followed a decrease in market volatility, mainly linked to structured product-related income. Gross margin on page 9, the analysis shows that the 4 basis point decrease year-on-year was quite evenly spread over the different components. The commission and fee margin declined by 2 basis points, of which 1 basis point was from a modest decline in recurring income. Moving on to expenses on slide 10.
Total operating expenses grew by 3% year-on-year, with around CHF 60 million of the targeted CHF 100 million cost reduction program already in the 2019 P&L. Personnel expenses came down slightly as lower bonuses more than offset the effect of 3% increase in average staff levels and the inclusion of the CHF 19 million of severance costs. Whilst average staff levels were higher year-on-year, the year-end level was down 1% as a consequence of the cost reduction program, which more than offset the first-time inclusion of the 76 staff from NSC in Mexico, and the internalization of over 100 formerly external staff. Excluding these two impacts, staff levels were down more than 240, delivering the bulk of the CHF 100 million cost reductions.
In the analysis of general expenses, it is important to note that we applied IFRS 16 which is related to lease accounting for the first time in 2019, and that we saw a sizable increase in provisions related to legacy cases. If you exclude these two, then the underlying increase in general expenses was 3%, mainly driven by the finalization of the client documentation review project, which is now completed, and an increase in non-capitalized IT spend. This is light acceleration in Q4. Excluding the impact of the IFRS 16 shift, the sum of depreciation and amortization went up by CHF 15 million, mainly driven by higher IT-related amortizations. As a result, the cost-income ratio stayed at around 71%, close to the level of 2018.
In this period, with a 4 basis point lower gross margin, and clearly a meaningful improvement from the 74% in the second half of 2018. As cost increase was below the increase in average AUM, the expense margin improved by another 2 basis points, and is now 5 basis points lower than in 2016. In summary, on page 11, the benefits of higher AUM and improved expense margin and the lower tax rate were more than offset by a lower gross margin, and the mentioned higher provisions related to the legacy cases. As a result, adjusted net profit declined by 5%. The adjusted tax rate improved to 15.8%, and our new guidance for the tax rate is around 15% for the next few years, following the Swiss tax reform and a much increased contribution from our Asian platforms.
IFRS net profit was down 37%, greatly impacted by the BVS provision and the Kairos non-cash goodwill impairment I mentioned before. Moving on to the balance sheet on page 12. Since the end of 2018, we saw a 7% increase in the loan book, driven by a 10% increase in Lombard lending and a 5% decline in the mortgage book. At the same time, client deposits increased by 2% and the loan-to-deposit ratio therefore increased by 3 percentage points to 66%. Finally, on page 13, capital. The CET1 ratio was 14%, up approximately 120 basis points since the end of 2018, despite the impacts from the majority acquisition of NSC and the Swiss Pension Fund. CET1 capital build was CHF 4.1 billion, whilst risk-weighted assets decreased by CHF 0.9 billion.
Credit risk-weighted assets declined by CHF 4.8 billion, following the decrease in mortgages and the reduction in the treasury book towards the end of the year, which together more than offset the effect of the strong growth in Lombard lending. Market risk-weighted assets went down by CHF 0.6 billion as a result of the decline in market volatility. With this, I have come to an end of my part, and I hand over to Philipp for the strategy update.
Thank you very much, Dieter. Ladies and gentlemen, let us now talk about how Julius Bär will be successful in the next decade, and how we will create and write a new chapter in our 130 years of history, a chapter in our company, and a chapter in wealth management. We start this chapter from a unique position built on 4 pillars: our pure focus on wealth management with no conflicting business lines, our solid foundations, our history and balance sheet, our international network and expertise, and yet despite our size, our highly personal approach in serving clients. The combination of those factors makes us the leading independent wealth manager today, and the only large player purely focused on wealth management. We have, in the last decade, defined pure wealth management.
During this decade, we have consistently and successfully pursued a growth strategy led by asset gathering in equal parts through acquisitions and the hiring of new relationship managers. This has given us critical mass with more than CHF 420 billion of assets under management, presence in 25 countries, almost 1,500 relationship managers, and more than 1,000 investment, credit, and wealth planning specialists. The environment in which we have executed this strategy since 2009 has been marked by the longest bull market ever and strong wealth creation. As we turn into the 2020s, new secular dynamics are unfolding in wealth management. First, client needs are structurally shifting from wealth creation to wealth preservation, and from individuals to families. Complexity rises and expectations rise, calling for even broader capabilities and deeper expertise in wealth management.
Second, on top of this, a generational change, most pronounced in Asia, is gaining momentum, where globally CHF 30 trillion of assets will be handed over from generation to generation over the next 20 years. That future generation is looking beyond just the pure management of assets and is interested to give meaning to their wealth. At the same time, the economics of our business have changed. Commoditization, combined with negative interest rates in European key markets, result in strong margin pressure. Wealth management needs to counteract this by finding new ways to create value for clients through solutions, through advice, through services, and new ways of sharing this value with our clients. Last but not least, more complex regulations, changes in technology, and increasing competition are driving up structural costs of doing business. Yet wealth management remains an attractive industry.
Personal wealth continues to enjoy high single-digit growth rates in most markets and generally develops faster than GDP. Long-term relationships, regulation, and economics create barriers to entry for new players, both traditional ones, but also technology-led ones. Julius Baer is excellently positioned to play a leading role in the industry, and we have all it takes to capture future opportunities. In this next decade, we aim to be the most admired global wealth manager, the best holistic and trusted independent advisor for wealthy private clients and families, the most entrepreneurial place to work for top talent in the industry, relationship managers and experts alike, financially strong, solidly capitalized, and with robust risk management, and a most attractive pure play and internationally diversified investment for our share and bondholders. To achieve and consolidate this position, we need to radically change how we execute.
Let me talk you through in the next minutes how we will sharpen our value proposition for sophisticated high-net worth and ultra-high-net worth clients across the globe from historically grown individual client management to a distinctive and coherent segment value proposition through services, through delivery, and the right coverage model. How we will accelerate our investments in human advice and in technology from building the foundations to delivering a state-of-the-art client experience, and how we will shift our leadership focus from an asset-gathering strategy to sustainable profit growth. Julius Baer will offer our two core segments, high-net worth and ultra-high-net worth clients, a distinctive, unique value proposition. We will serve those clients individually, as families, and over the generations. We will be at our best servicing clients with a high degree of complexity. The more complex the needs, the better.
We aim to be their trusted advisors and maximize our share of wallet with those clients. High-net worth individuals, contrary a bit to industry trends, will be served in a personal way with a dedicated relationship manager. We will offer unrivaled breadth of solutions and possibilities to customize based on technology that supports this scalable customization. To our ultra-high-net worth clients and families, a segment in which Julius Baer has today more than CHF 150 billion of assets under management, we will be true wealth architects, combining our global coverage, unrivaled access to expertise, and an ability to deliver highly bespoke solutions in combination of our open architecture with our balance sheet. We do serve our clients directly, as well as through selected intermediaries. With intermediaries, we aim to build long-term partnerships across their entire life cycle.
Julius Bär has already one of the most comprehensive solution ranges and pools of expertise in the entire wealth management industry. We will invest even more moving forward to make it even more relevant for our clients and capture new market opportunities. Let me just highlight three areas of innovation. Our digital asset offering in collaboration with SEBA, taking initial steps, very first steps for our clients to benefit from the future tokenization of assets and the associated trends. Our structured lending and risk transfer solutions for ultra-high-net-worth individuals, including cash flow-based or pre-IPO lending, and our growing impact investment product range, alongside sustainability and philanthropy, where we will launch new solutions this year. Investments in this context happen both at a local and a global level.
We add local market expertise and regional investment views across core markets, and we drive global thought leadership, as we have just done through the Global Wealth and Lifestyle Report or our next-generation research and investments. Julius Baer has today approximately 1,500 relationship managers organized in almost 200 front teams. We will accelerate the transformation of our front organization to achieve greater impact for our clients and provide distinctive service to our 2 segments, even while we continue serving high-net worth and ultra-high-net worth individuals from the same integrated teams. To do this, we will enhance the roles in our front teams around the relationship manager. We will dynamically bring together flexible teams of experts and specialists ready to do to address specific client needs, and we will tailor the client experience, the service delivery, and our solutions to both client segments.
We also accelerate investments in technology to power human advice. Specifically, we will increase IT investments by approximately 20% for 2020 and 2021. This will create new revenue opportunities and increase efficiency. The main shift is from the modernization of our back end to investing into client value, enhancing technologies at the front end. Let me give you three areas of examples. To create new revenue opportunities, we will accelerate our investments in AI and data. For example, in predictive analysis on client retention and share of wallet potential. To facilitate scalable tailoring of discretionary mandates and a consistent and scalable advisory process, we continue to invest in our mandate designer entities, which will deliver both increased revenue and enhanced margin.
To increase quality and efficiency, we are re-engineering processes, for example, our workflows in risk management and anti-money laundering, and drive robotics in mid and back office processes. Again, delivering margin benefits. In order to excel in wealth management, we believe we also need to move beyond just managing wealth. Julius Bär, with our more than 100,000 client relationships globally, is ideally positioned to be a facilitator, providing our clients with a platform to create value beyond banking. Our global young partners program brings together the children and the grandchildren of our clients. Our U.K. entrepreneurs program brings together clients and prospects that share the same challenges and the same opportunities. Our vision is to build cross-generational communities, spaces in which they can share and exchange, but ultimately, also co-create content and business opportunities together with us. One last key thrust. It's all about people.
We will continue to attract the top entrepreneurial talent in the industry across the board. We will continue to focus on relationship managers, equally on experts and specialists. We will further invest in skills and training, for example, training more junior relationship managers and continuing to attract top talents. We will upgrade our incentive and compensation systems and align them with our financial targets, our entrepreneurial aspiration, also with our risk standards. This all crystallizes into one big shift, to uncompromising focus on sustainable profit growth. Profit is the most holistic measure of success. We set a very clear growth target of more than 10% per annum over the coming cycle. Profit encompasses 3 input factors that we will manage and balance.
Assets, therein included, of course, net new money, as an important input factor and the raw material for value creation with the client and the bank. We will manage this as an input factor, no longer as a target per se. Margin, specifically in our industry, gross margin stabilization in an environment of margin erosion by creating value for clients, driving cross-selling, and realizing a fair price for our services. Ultimately costs through our efforts to increase productivity and efficiency. How do we operationalize this strategy for profit growth? Julius Bär is engaging now over the next 3 years into a comprehensive program to expand client value and revenues, to improve productivity and efficiency, and to drive a more integrated and inclusive culture.
We aim to deliver more than CHF 150 million of revenue improvements through an enhanced offering and global rollout of fee-based mandates, systematic review of client opportunities, deepening of our markets and credit capabilities, and improved value realization through pricing. We are starting a CHF 200 million cost program with full impact in 2022 to create the basis for this. The bulk of measures will be taken in 2020, and impact net of restructuring costs will start to materialize in 2021. This will include a further simplification of our organization, front and back office structure, as already started last year, the review of our geographic footprint based on future growth potential. We have already taken one key decision, which is to close our booking center in the Bahamas. Further optimizations will be decided in the first half of 2020.
This all will be complemented by improvements in operational efficiency and excellence across the board. Overall, we estimate that in 2020, this will imply a 300 reduction in the number of jobs in the entire group. We will further and uncompromisingly strengthen our corporate values and our robust risk and compliance culture. On that note, we have concluded Project Atlas this last year, which involved the reviewing of data of all clients globally. The new standard of KYC quality, which we will bring into the future, enables us now to control client risk much better, while at the same time offering us opportunities for more targeted service and advice. We will focus on profit growth and the accompanying measures and put that focus into a new set of targets for the coming three-year cycle, 2020-2022.
We specifically aim to achieve a more ambitious cost income ratio, now at 67% or lower by 2022. A pre-tax margin of 25- 28 basis points. Focusing on the outcome rather than on the input factors. Assuming no meaningful deterioration in markets or FX, we will deliver more than 10% growth per annum in adjusted pre-tax profit over the cycle. Supported by active capital management, we will deliver over 30% of return on CET1. Our dividend and capital return framework remain unchanged and reflect our strong capital generation. Ordinary dividends will distribute 40% of adjusted net profits. This can be complemented by share buybacks or special dividends. Our RoCET1 target provides a clear incentive to continue to actively manage our capital base. The current CHF 400 million buyback program will run until end February 2021.
Let me summarize. We are and want to be a leading global wealth manager, and we will continue to shape our industry in the decade ahead. To achieve this, we will dynamically modernize our institution as we enter into the next 130 years of our history. We will strive to be most relevant to our clients, to our distinctive value proposition, coverage, solutions, and value add. We will provide an entrepreneurial environment for the top talent in the market and jointly own our clients and our business. We will foster innovation within our industry in wealth management, but also beyond managing wealth. We will cultivate and leave a sound and robust risk and compliance structure, and we will shift from an asset gathering strategy to clear focus on sustainable profit growth.
Taking all these steps together will help us to become the most reputable and admired brand in wealth management. Thank you very much for your attention. We will now be open for your questions. Who would like to start, please?
Good morning. It's Daniele Brupbacher from UBS. Thank you for the presentation. I wanted to ask about obviously the targets, and you do de-emphasize net new money. I think the set of targets are clearly group targets, and I would argue that they are not really directly applicable at the RM level. You made that comment on slide 17 that you upgraded the incentive and compensation system. I would be really interested to hear how you changed the steering, let's say, measurement of the individual RMs. Because I think if I remember correctly, there were basically two models in the past. There was a discretionary and more an entrepreneurial model. Have you changed the KPIs? How do you measure that, and what have you actually changed?
Probably just secondly really, sorry, it's a bit, a simple question, but just start to the year, what have you seen? What's the trends? How does it feel like compared to a year ago or versus the end of last year?
Thank you very much. I think profit, in our view, is the most holistic measure for success, and profit has three components. It has assets and obviously net new money, but it also has, most important, revenues, especially in an environment where there is challenge on the margin and of course cost. Focusing on profit allows us to holistically manage and to balance those three factors. Ultimately, this is, as you're saying, happening at the group level, but this has to happen at the regional level and has to transcend down to individual relationship managers. Obviously, the balance of those three factors might be individualized for some markets, and some market environments are more conducive to growth, while other market environments are more conducive to margin environments.
We are upgrading, as we speak, our compensation and incentive systems, and we'll develop and deliver this throughout this year. As for the start of this year, it's a bit too early to make strong indications. I think the books are not fully closed yet on last month. I take overall a constructive stance as we go into 2020 with all the challenges that we have out there, obviously. Please.
Hello, good morning. It's Daniel Regli from Octavian. I have a couple of questions. The first is also about the new targets. Can you maybe lead me a bit through what has changed in your base assumptions which led to your new targets? Particularly, you have lowered your cost income target from 68- 67 now, but the pre-tax margin has been stable as the targets have been stable. Do you expect higher provisions, or what was the reason for this inconsistency in moves in your targets? The second question is about the costs. Maybe can you give me just a little bit an update about the Atlas project and how much should we expect a step down in costs for 2020 over 2019?
Is this step down already included in your CHF 200 million cost savings target until 2022? Yeah, I'll leave it with this for the moment and maybe come back later.
Thank you. I'll take the first half and leave the Atlas question to Dieter. I think our lower cost target reflects the structural adjustment on the cost side we are entering into with the CHF 200 million cost program. The underlying dynamics behind the margin is that we believe there is further deterioration of margin in the market. This is a general pressure in the industry of maybe roughly 1 basis point per annum. We think we can counter that trend, and we can work against it. That's the backdrop against which this target is formulated. On the second question, in 2019, we spent about the CHF 40 million on Atlas as we forecasted, and this will not recur anymore, and it's not part of the CHF 200 million.
Michael Kunz, Zürcher Kantonalbank. Sorry to insist on the gross margin. We have seen declining gross margins across the industry for quite some time now, and everybody wants to counter it through more sophisticated products, through more mandates rolled out, et cetera. What makes you confident that you kind of can improve it against the trend right now? Where would you source those higher margin products? Let's say, you mentioned pre-IPO financing and things. The second question refers to relationship managers. You had a decrease actually during last year. Can you give us a certain indication how the mix is between relationship managers that you were kind of happy to let go and relationship managers that were, how to say, lured away by the competition?
Following to that, the third question, if you mention more team approach and joint responsibilities, is this also a measure kind of that makes it easier then to defend clients, if somebody gets tempted by a competitor? Thanks.
Thank you. I think what makes us confident that we can hold and actually increase revenues with our clients is simply the success in the past. We have been conducting service model rollouts in advisory over the last few years, where we have very successfully converted clients from a more transactional brokerage-type model into an ongoing, paying for advice type of model. We have mainly done that in Switzerland and in Europe and now started to attack other geographies. The success of that model shows that if value is created, then clients will actually accept that and move into that direction. You talk about sophisticated products. I don't think it's a sophistication of product. I think the key to margin is the usage of solutions in the full breadth.
This is why we have launched a few years ago also Your Wealth Holistic Advice, which has shown great steps towards a broader use of solutions on the asset management, the financing, and the wealth planning side. We plan to further continue that. Our front transformation is going to help us bring those solutions even better to clients. Let me make a quick statement on the team before I leave it to Dieter for the relationship manager numbers. Yes, I do believe teams, of course, have a degree of retention value. I think they even more have a degree of service value for clients. Serving clients through teams, having the right expert and specialists together, will create the better experience for clients and help us having long-term client relationships.
On the RM question, on the leavers, I would say about two-third of the RMs that left in 2019 were asked to leave, and about one-third left on their own or were internally taking on another job. That's a bit higher proportion of people we have asked to let to go as in previous years, due to the cost program.
Maybe we switch to two questions or three on the phone.
The first question comes from Anke Reingen from the Royal Bank of Canada. Please go ahead.
Yeah, thank you very much. Just coming back on the gross margin, please. Can you please tell us what you've done so far in terms of charging deposits? I was interested to see that the deposit base continued to increase in the second half. How much of the benefits have already come through, and how much room do you think you have to support your gross margin? Secondly, on your capital return policy, you said the 40%, but then stressed a couple of times that you have room for active capital management. Do you have like a total payout ratio in mind longer term, especially once the buyback runs out in 2021? Thank you.
Thank you for the question. On the first one, on charging negative rates, I would say we're now around 35%, a third, what we charge, what we potentially could. As we said earlier, we do it client by client. If a client is highly profitable, but we could from our rules charge negative rates, then we don't do it. It's an assessment on a client base. We increased to that level in May. In the second half, the full effect is already in the net interest income line. The second one, I mean, we do have a target on the dividend payout, which is 40% of the adjusted profit.
As we do now, complement, from time to time with share buybacks, could also be special dividend, but there is no target on the overall payout, just on the dividend.
Sorry, coming back to the first question. When you said you're already charging 35% of what you potentially could charge, how much is that the total base as % of your total deposits? Thank you.
I don't know. I think we charged out of my head, you can read it in note 1, about CHF 25 million between Swiss francs deposits and the euro deposits.
You can do the calculation on your own.
Okay. Thank you. Thank you.
One more question from the phone.
Next question comes from Jeremy Sigee from Exane BNP Paribas. Please go ahead.
Morning. Thank you. 2 questions, please. One is, it's kind of linking a couple of points that have been discussed already, which is the lower net new money targets, but also the reduction in adviser numbers that happened during 2019. I just wondered really what we should expect looking forward, whether your lower net new money or the lack of a net new money target signals less interest in hiring or less aggressive approach to hiring than we have been used to over the last 3 or 4 years. That's my first question. The second question, related to that is, I guess, also your appetite for acquisitions and what you see being available. Do you expect to find deals in the next year or 2?
Thank you for your questions. I think in terms of asset growth, there are different sources of asset growth. We obviously want to explore all those sources. Relationship manager hiring will continue also in 2020 and 2021, even though without a specific target associated to it. We will put a lot of attention on the growth of share of wallet, so creating asset growth from our existing client base and working with them to attract a broader range of assets. We will use all those diversified sources to continue growing our asset base. As to acquisitions, Julius Bär has been successful in the last decade in acquisitions and in integrations more than once. This is clearly a capability we have. We have always looked at the market and will continue to look at the market.
Targets would have to come in the right geographies, our core markets, at the right quality and at the right price.
On the adviser hiring, the 80 number that your predecessor had talked about, the 80 isn't really a number that we should think about anymore. Is there another number that we should think about as realistic? If not 80, then a smaller number.
I mean.
Would you just prefer to have no target?
Yeah. I think especially in 2020, it will be difficult like in 19 as we run a cost program. The net figure is will probably be much lower than the CHF 80. We still continue to hire, as Philipp says, in core market, in promising markets.
Okay. Thank you very much.
Taking the next question from the room.
Hello. Thanks again. Daniel Regli from Octavian. I've got a couple of questions regarding the client behavior also in H2 2019. On one hand, maybe again about the net new money number. Obviously, net new money from ex Kairos was quite encouraging in H2. My question is a bit how much of this was driven by Lombard lending, which obviously has increased towards the end of the year? Also, how much negative impact can you give us kind of an idea how much negative impact we have seen from the Atlas project? What would the net new money number have been if we wouldn't have had the Lombard lending and if we wouldn't have had Atlas?
The second question is a bit, what is your sense about the clients or what kind of questions you have about, if you're discussing with clients on their margins or what they're willing to pay for your service, what are the worries of clients, particularly also in relation to now we have seen quite the move, I think, of clients more into equities again towards the end of the year. We're maybe running into a little bit of a correction. Is this kind of a downside for, let's say, longer-term discussions with clients, what how they appreciate your value? The last question is on performance fees. I remember in 2018, we have quite no performance fees from Kairos.
In 2019, what was the contribution of Kairos performance fees in 2019 to the gross margin?
I believe the first and the last.
Yep.
The first.
I start with the first one. Indeed, credit volume went up, as I said, and therefore there was also some portion of net new money coming from credit. It was not skewed, especially to the second half, so it was throughout the full year, but it was also not over proportional, so it was in more or less in the normal range. On the net new money, if you would add back outflows related to Atlas, to this documentation review project, but also to the negative rate, we started to increase in May. I would say if you look at the 4.1%, we would have been closer to 5% with these two impacts. On the last question, performance fees from Kairos.
In 2018, there were around 24 million, and there were more or less double in 2019. Maybe one word about client behavior, and I'll look at this from a short-term and a long-term perspective. In the short-term, obviously, I think coming out now, still out of that longest bull market in history, I think clients obviously have been climbing a bit the wall of worry in the end. We've been always counseling our clients to stay invested, as the cost of not being invested would actually have been higher. I think obviously the short-term event risks that exist on the political side, on the macro side, they are there.
Even though such events, as tragic as they are, for example, right now, the coronavirus, they typically then lead to even more and longer stimulus, so they might, in the end, even prolong the bull market.
I think the key discussion we have with our clients, obviously on the asset side, is around having the right asset allocation and the right diversification. There have been no big changes recently. We have, obviously, broader discussions with them about how can you use the full range of solutions, including financing, but not cost-led, just adding to it to enhance the risk-return profile of the portfolio and wealth planning. That's where a lot of the emphasis has gone in and will go in moving forward. The one in the back was first. You I'll take both of you. You first.
Okay.
You have the mic.
Johannes said. Concerning your layoffs, could you describe where these people, in which departments or countries these people have to leave? I guess it's not in your None of your relationship managers have to go, I guess. Secondly, concerning the investigation by FINMA, do you have a feeling that FINMA will after looking at Atlas will not say that you have to put up a supervisor? Do you have any comment on that and do you have any idea when this investigation will be finished?
Thank you. To your first question, the reduction in jobs will be front to back, so it will affect front office, mid, and back office on a global scale. To the second question, yes, we have concluded Atlas at the end of last year and upgraded the KYC of all our clients. The investigation of FINMA that you're alluding to is still pending, and I do believe that the resolution of that is imminent. That's all I can say about it.
Hi there. Patrick Winters from Bloomberg. I have a question regarding the investor base. From your conversations with them, are they on board with your plan to move away from asset gathering and, you know, move into a different kind of strategy? Why is it the time now to move away from asset gathering? I guess UBS also seems to be doing a similar thing and focusing more on share of wallet and less on the total amount of assets. Why now?
As I've set out in the presentation, I believe this is a time where the secular dynamics in our market are changing and are changing in a market way, both on the client side, but also on the external parameters. I think margin pressure is just a reality in our industry, and we have to address this in a very consequent way through focusing rightly on revenues and the revenue potential. On the other side, costs have been sticky, and focus on costs is needed. On the asset side, I think growing assets is almost quoted the easiest part if you do it regardless of the two other factors. We exactly make the statement that we have to align our asset growth and balance that properly, both with margin and with cost.
In that sense, what we are doing and what we are planning is in the fullest interests of our share and bondholders. In that sense, I think the markets can only welcome that. We keep our capital policies and our management of that as it has been very sensible in the past. Let's take 2 more questions on the phone quickly.
The next question comes from Hubert Lam from Bank of America. Please go ahead.
Hi. Good morning. I've got 3 questions. Firstly, on your RoCET1 target, you've downgraded from more than 32% to 30%, more than 30%. Just wondering if you can explain why you've done that. Second question is on the cost income ratio. You're targeting 67% by 2022. Just wondering if you could just give us the, what your thoughts are in terms of the trajectory to get there. Do you expect the cost income to improve gradually to that date, or do you expect it to be relatively stable to, from where it is today, just given the costs are more back-end loaded before coming down? Just thoughts around that.
Lastly, on the ultra high-net-worth client segment, seems like you're focusing on it more now. Maybe you can give us some color in terms of how you plan on competing against the larger Swiss banks. What percentage of the flows have come from ultra over the last year or two? Maybe also on the gross margin, how much lower the gross margin is probably within the ultra segment versus your headline number. Thank you.
I'll start with the third and leave the first two to Dieter. On the ultra high-net-worth, this is not a new focus. This is a segment that we have been serving very successfully so far. As we published from mid last year, more than CHF 150 billion of assets in that segment. Obviously, looking at it just from a gross margin perspective, that margin is a tick lower than what you would have in the high-net-worth space. That's also not unexpected. On the other side, this is a segment that actually is willing to pay for value added.
I think the strategy, our strategy hinges around bringing true and unrivaled expertise to those clients and do it in a completely unconflicted way, having structures, having credit specialists, having lawyers, wealth planning specialists, together with our client at 1 table and serving them out of 1 hand with 1 objective in mind and out of 1 P&L. Again, combining our abilities in open architecture and our connection to the entire market with our strong and solid and deep balance sheet. That is a very appealing value proposition to ultra high-net-worth individuals.
To your second question about the kind of the way from the cost income ratio from where it was last year to the target in 2022. It's indeed, I would say from today's viewpoint, gradually also you have to take into consideration the reduction costs that will impact the 20 and also a bit the 2021 result. Other than that, more or less a gradual improvement is on the plan. On the return on CET1 capital target, which we lowered from 32- 30. This was a bit driven, was driven the slight decrease by a view that we will use more the balance sheet so that the risk-weighted assets will be higher throughout this period, and therefore, the target is still a high 30%. Next question.
Thank you.
The next question comes from Stefan Stalmann from Autonomous. Please go ahead.
Yes. Good morning, gentlemen. I have three questions. The first one, regarding your adjusted operating expenses. Do you think that your adjusted operating expenses in 2022 will be actually lower than they are in 2019? Second question regarding your ambitions in structured lending. Could you maybe talk a little bit about how big your book currently is, and what kind of potential growth we may see here, and including potential capital consumption in this area that you just hinted at in the previous question? Lastly, you had quite a marked drop-off in your credit risk-weighted assets in the second half of the year, despite continuing loan growth. It seems as if you have potentially shifted some securities out of the old AFS category into trading.
Is this shift sustainable, or should we expect this to reverse, relatively quickly, in 2020? Thank you very much.
Yeah, maybe, just I'll take the last question. I mean, the shift or the decrease of the credit risk-weighted assets in the second half was on the one hand, driven by lowering the treasury portfolio, which of course is not sustainable. We will invest whenever we believe it's a good time, that's more a timing issue. The second impacting factor throughout the year was the decrease of the mortgage lending. Because we don't have a model, a very high intensity of around 40% risk-weighted assets. As this was gradually going down, we had a relief on the credit risk-weighted assets. These were the two trends. The second one, the mortgage portfolio, I don't see that this will go up dramatically.
Probably will stabilize, but definitely not a sharp increase again. On the structured lending, today this is a very, very small portion of our loan bond book. The loan bond book being about CHF 40 billion by the end of last year. We only have started doing some deals, smaller deals, to the end of 2018, 2019, that's very small currently. It's also too early to say what is the full potential and how will it affect the risk-weighted assets. Of course, normally they have a higher intensity than a straightforward loan bond lending. Whether the adjusted operating expenses in 2022 are lower than in 2019, of course, that has to do with a lot of factors.
On the one side, the cost, the CHF 200 million we want to save, it will clearly imply a lower cost base. Of course, we expect also asset growth, revenue growth. Therefore, the, the performance-based payment will go up. We will hire outside of the cost program, as Philipp explained. I think it's, it's to work out. There will clearly, from a, from a FTE perspective, as Philipp mentioned, there will be less people by the end of 2022 than end of 2019.
Yes. Right. Thank you very much. Thank you.
Thank you.
Lukas Haas, DZ Bank, Central Europe. Mr. Rickenbacher, your new slogan, most admired bank, sounds somehow familiar. There was another bank close by that used that slogan a couple of years ago. They have some problems now. How comes that you use that slogan? What is exactly the meaning for you? What do you want to realize? Maybe a little bit connected to that, the market reacts negatively today, this morning. Are you surprised that the share has gone down some percentage points? Thank you.
Thank you for the question. I think admiration and reputation has multiple dimensions. I think there is obviously a regulatory part to it. There is a client part to it. I think we definitely want to be admired and reputated among our clients for the value add that we offer them. But it's not just the clients, it's also the employees. You know, we want to be the right employer for entrepreneurial talent and offer them the breadth and the depth of opportunities that they have seen in the past and they can see in the future.
Ultimately, it's also about adding value to society. I think this is a way of phrasing that, we address multiple stakeholders, and we will work for them to add and create value into the future. As for the share price in the short term, I think, you in the room can comment that better than I can. I will take a long-term perspective on that. As we have said before, believe that this is the right strategy for the next decade for Julius Baer. Please.
Quick question about your geographic footprint. You mentioned that you're looking at that. I'm just wondering, can you give us any ideas on which markets you have in your mind there, apart from Bahamas? Also in this line, how is the German market doing, and what are your ambitions there? Can you give me some details? More broadly speaking, would you agree that Bär has put too much focus on geographic expansion under your pre-predecessor?
In terms of geographic footprint, I cannot give you much more details. I think it's known that under my predecessor, a focus on core markets has happened, and I think that strategy will be continued moving forward. We will review locations in the first half of this year in light of their commercial potential and of their future growth potential, and we will communicate decisions as we do take them. As for the German market, this has been an important market and a growth market for us in the last few years. We have significantly invested in that market and expanded, and we plan to continue our investments and our developments in Germany as we move forward.
Thanks.
Yes, please. The front.
Oh, yeah, sure.
Sorry?
Yeah. I was wondering about your pre-predecessor. The question was, did you expand too fast under his leadership?
I don't comment on that. I think we have been going through a process under my predecessor, Bernard, to focus on core market. I fully believe that this is the right strategy also moving forward.
Hi.
Hello.
Nathalie Olof-Ors from the Agence France-Presse. Two questions. You didn't include too much indication on the outlook for this year. Could you tell us, explain us how you see the economy unfolding this year and what risk you're going to watch in particular to make sure it doesn't interfere with your plans to refocus the bank? To touch again on the geographic expansion under your predecessor, you had a clear focus on expanding in emerging economies to capitalize on growing wealth in these new economies. You refocused on core markets. In this review, what are you going to look after, look in particular? What are going to be your criteria to assess what's worth keeping and worth leaving?
Thank you very much. Our view as we go into this year is a constructive view. I think we could almost end up in a bit of a Goldilocks scenario where growth in the market is fast enough not to be in recession, but slow enough not to be in inflationary territory. Worried not for external factors and external shocks that can happen. I think they can come from a political side, as they come in the past years. They can also come from other events, such as now, the virus outbreak in China, where it's way too early to say what's sort of the amplitude of the impact of this event.
I think in such a time, again, we believe that it's worth being invested for clients, and we're working with our clients to continue being constructive, but still obviously careful and making sure that the natural hedges in the portfolio can be applied. Still, I think, again, external shocks can at times lead even to prolonged stimulus. I would not say that the events right now that we see in the first quarter will lead to an abrupt end of the positive sentiment that we had when coming into this year. Talking again about the geographic footprint, it's true that we have a broad geographic footprint in established and in emerging markets. I can say that even in emerging markets, we see strong contributions to our result and growth in many of those locations.
I think in Dubai, where we have license number one in the DIFC and been developing this over many years now, this is an important location. In Brazil, for example, where we're just integrating GPS and Reliance into JB Family Office. That's again, an important contributor to our group. We are very happy with activities we do have in emerging markets, as we have seen, by the way, also growth from existing core markets. I think the only consideration we will give on the location footprint is really a commercial view. It's the long-term potential of those different locations to grow. It's also our ability to achieve critical mass over time in those advisor locations. I think that's the most important criteria that we will apply to this moving forward.
Can I say, maybe just on slide 46, you'll find the AUM breakdown by geographical areas. I think it's worthwhile to mention that in Asia, we have now 25% of assets under management. We started that business in 2006, 2007, and it's highly profitable. The Asian business out of Hong Kong and Singapore had the best year last year ever.
Question back there.
Johnny Tulaf, TEO Media. I have three questions. The first one about your restructuring program. What is the cost of this program? Second.
About investments, you are talking about productivity. As far as I know, the Julius Bär's IT systems are not very new. How do you see the need of investments in these in this field and the importance of IT in order to improve productivity in your industry in general? The third question is, what is the importance of size in this contracting industry, and where do you see Julius Bär in that?
Thank you very much. I'll start with the second and the third. I believe on productivity, I would a bit counter that view. I think in many places, front to back, we today have actually very modern systems. If you look at our back end, we just completely modernized our back-end infrastructure in Singapore and in Luxembourg with Temenos. Host in Switzerland that is further developed is actually the most cost-efficient system that exists. We've not just invested in the back end, we've considerably invested in the front end. DiAS is the example, the Digital Advisory Suite, where we are, I believe, in a leading position also in Europe to offer advice under MiFID regulations. In that sense, I think the starting point that we have is strong. Obviously, technology is needed to drive further productivity.
We're working with robots in middle and back office. We're working with process reengineering and automation. I think a bigger magic is really in integrating the process reengineering into technology, and it's not just a technology gap. As to size and critical mass, I can't give a number on the overall business. I think I look at this more from a booking center to booking center, from an advisory location to advisory location, perspective. I think this is where the complexity in the business lies and where the entire value chain has to follow in order to offer the ability for local content, localized products. That's where we need to have critical mass.
To come back to the first question about the cost of the restructuring. If you look at page 28, it's only in a footnote. It will cost about CHF 60 million between 2020 and 2021.
Take a next question on the phone.
The next question comes from Nicholas Herman from Citigroup. Please go ahead.
Yes, good morning. Just 3 questions, please. My 1st question, just culturally, the shift away from focus on pure growth. Yes, to more of a focus on wallet share. It seems like quite a shift culturally. How quickly do you expect to circulate that into the business performance? Secondly, on revenue improvements, can you just provide us with a little bit more of a granular split of where the incremental revenues are coming from by product? Be it mandate structure solutions or even from AI and predictive analytics. I mean, I understand, at the same time, I understand that you expect a revenue uplift. Equally, in the past, Julius Baer has missed on revenue improvements.
It's had to cut its mandate targets twice in the past. It's still only at about 54% penetration versus the current 70% ambition. My final question is just on the cost cuts. This time last year, when Julius Baer announced the CHF 100 million of cost savings, your predecessor told us that he did not want to announce more than that because he didn't want to cut into muscle and impact what is a strong franchise. I guess my question is, how confident are you? Given that you are still making a decision on location optimization, how confident are you on the CHF 200 million? Why is that the right number?
Given that it cuts off front to back, how much muscle are you cutting into? In other words, what is the associated revenue attrition? Thank you.
Thank you very much. Let me start with the first one. Culturally, yes, indeed. I think this is first and foremost, obviously, a business decision to take the complete and holistic focus on profit and its three components. It also implies, to some extent, a cultural shift. I do believe this is a positive cultural shift at all levels of the organization because it will allow the managerial levels to apply more entrepreneurial degrees of freedom. Being able to manage the three factors: assets, margin, and costs, rather than just acting on a single factor. It will also ultimately allow a more differentiated target setting at the front line, where in some markets, the structural growth rates on the lending money are just different, while other markets are more prone to underlying growth.
In that sense, I believe this is not just a cultural shift. It allows us to do better target setting.
Better revenues.
Better revenues. I think I've laid out some of the levers that will contribute to revenues. I think the most important is that our activities on the revenue side are brought together into an integrated program. We have in the past had successes in running revenue through integrated programs. I mentioned the service model rollout previously, where we've been looking at a client relationship systematically and bringing them into the right service model. This has been a very successful approach to drive revenues over time, and we intend to do this again and to use this integrated approach. This is going to be the sum of many different parts, obviously, and the key levers, as I said, are around the solution usage, are around prices, are around to further roll out of the fee-based mandates.
Also a further adoption of discretionary mandates, for example, through a different and then more efficient and effective way of access, through the mandate designer. We have outlined internally all those programs and the initiatives that we need and are running them as an integrated program.
I just thought on that, I mean, just how Can you give us a sense of how much of the CHF 150 million uplift is coming from solutions, from pricing, from mandate and from discretionary, please?
No, I will not provide a breakdown at this stage. Maybe on the CHF 100 million cost program versus the CHF 200 million right now, again, as I said, we take a structural view to cost now in the medium term. We do make cuts front, mid, and back, but I do not think that we substantially cut muscle as we do that. Obviously, I think taking decisions at a scale of closing an entire booking center as the Bahamas will have some implications for business, and we will have to spend some efforts on rebooking assets and retaining them. I think that's obvious. Still, we do believe that the structural reset is possible and feasible and needed.
Okay, thank you.
Next question.
The next question still on the phone?
The next question comes from Adam Sherlock from Mediobanca. Please go ahead.
Good morning, all. I've got three. Firstly, just on how we think about the top line. Clearly, you're moving away from asset gathering, but you're also talking about margin stability. If assets aren't going up via net new money, then how should we really think about revenue growth going forwards? Really how much of revenue upside is from rising markets and beta rather than alpha, which seems to be protecting rather than growing revenues? On net interest income, clearly there's been a step down half on half, feeling the hit of lower USD rates. Could you call out how much impact there has been on swap income that's hidden in the trading line?
What are the moving parts on the interest rate pressure we've seen in reported NII and how that could evolve into 2020? On the cost side, obviously, it's a CHF 200 million cost program. You're highlighting investments in technology as well. Is this CHF 200 million a gross figure? What would the net savings look like? Thank you.
Thank you very much. I'll answer the first and the last. On the top line, when we talk about margin stabilization in a time of margin erosion, I do think we have a substantial upside potential still. We have that essentially from product usage. If I look at the solution usage in wealth management, wealth financing, and wealth planning across the globe, we have still substantial potential in bringing the whole bank to our clients. That is going to be a big part of the margin uplift, combined, of course, with realizing the fair value of that. Maybe, Dieter, you say something about.
Yeah, on the net interest income, it's a fair assumption what you do. The swap income, second half to first half was lower as the pickup on the swaps between these two currencies from US dollar to Swiss francs was further declining. There is less in H2 than H1.
Can you quantify it?
It's the situation is the same, going into 2020.
Can you quantify that?
1 basis points compared, second half to first half, less.
Thank you.
Thirdly, on your question of the cost reduction program, whether of gross or net, obviously that's a gross figure. That's the cost reductions that we're doing. This will be offset at obviously on one side by some investments in technology, even though not all of that will hit the P&L with the capitalization that we're applying in that. By other targeted investments, such as, for example, ongoing hiring of relationship managers and of specialists, as I've alluded to. We can't give you a specific breakdown of that. It will all have to fit into the 10% profit growth over the cycle.
Great. Thank you.
Yes. Take one question from the room.
Wouldn't it be more reassuring for both credit and equity investors if you reported your medium-term targets for 2022 on the reporting rather than on an adjusted basis?
We are consistent discussing the adjusted result. This is appreciated, at least as far as I can tell from the sell side and from the buy side. Therefore that's also the basis to set the targets. The ongoing adjustments between the adjusted result coming from IFRS are very transparently explained. These are the amortization of the intangibles related to acquisitions, which we take that out, and the expenses we have related to integration, the restructuring of acquired businesses or divestments. It's very transparent, and we have never had complaint from buy or sell side.
Is there one more question in the room? If not, we'll then afterwards switch back to the phone.
Thank you. Jeffrey Berger from finews.com. I have two questions. One is, can you give a concrete figure on the 20% additional tax spend that you mentioned? The second one, I think recently you announced the start of the collaboration with SEBA, and you mentioned it as one of your examples as well. Can you give some color on how much client interest you've been getting from that and what sort of revenue you're hoping for? Thank you.
I'll start with SEBA. I think it's too early to give specific numbers around that. I think we're looking at, let's say tokenization of assets as a long-term trend. It was important for us to have a link to that and the ability to actively pursue the developments in this space. Our collaboration and small investment in SEBA is the platform to do that. At this very stage, we are in the very first steps. It's about custody and transactions still on some of the cryptocurrencies in a completely non-advised format, obviously. We'll be working together with SEBA in taking the next steps in that direction. Bit early to give a full potential to that.
On the technology side, I think we've never given a indication of the specific investment volume, and I will not do that moving forward.
Hi. Brenna Hughes Neghaiwi from Reuters. I had a further question about the CHF 150 million in revenue improvements you expect to see through this strategic program and the breakdown between ultra and high net worth individuals. You've mentioned in terms of the strategy for high net worth individuals, you're taking a different approach than competitors to advising this client group. Does that mean that you expect to see a larger proportion of revenue improvements from that group? Do you foresee from these initiatives possibilities to substantially gain market share in that group?
Thank you for the question. I think we see improvement potential in both groups, but the improvement potential will obviously come from slightly different levers. I believe for the ultra net worth clients, this will be a case by case. This will be very much an individualized approach to really understand and serve their needs. We've been successfully implementing many projects over the last few years together with our largest clients, and we'll continue to do so and offer the expertise to do that with a bit more scaling. Even though obviously in that segment, I think scalability will naturally be limited by the complexity of the requirements. The profit potential of individual cases can be actually quite high. In the high net worth segment, I think this is I don't wanna use the word standardized.
This is a bit more, let's say, predictable in the sense that we know very well which solutions are our high net worth clients using. We know very well where we currently have challenges in bringing the full range of Julius Bär solutions to those clients. Let me take one example. Wealth planning 5 or 10 years ago was a completely manual discipline, which required a lot of time from individual wealth planners deploying their capabilities. We're now working towards implementing expert systems to make those capabilities much more scalable and broadly applicable. In that sense, we will be systematically working with our high net worth individuals to offer them the full breadth of the Julius Bär capabilities. Out of the CHF 150 million, hard to make a breakdown, but both segments will definitely contribute.
Let's take the 2 last questions on the phone.
The next question comes from Andrew Lim from Societe Generale. Please go ahead.
Hi. Good morning. Thanks for taking my questions. The first question is asking more about the color for the change in your strategy. I mean, traditionally, you've had a relationship manager-led growth model, and now you're aiming for more wallet share. I'm just wondering what you sense in terms of the landscape that's driven that. Are relationship managers becoming more expensive? Are clients just less willing to give their money over to you and so it's more expensive to acquire net new money? Just a sense from you as to what you're seeing in terms of the landscape. The second question is regarding your technology proposition.
Lots of initiatives on your part, when you look at competitors, what really stands out for Julius Bär, for clients in terms of your technology proposition, versus your key competitors there? Your, and then the 3rd question from me. You talked about reduction in your treasury portfolio driving down risk-weighted assets in the 2nd half. I guess that's the bigger part of the reduction there versus the mortgage loan book contracting. What's the overall strategy here? What assets have you reduced? What do you intend to size up in going forward in term and drive that risk-weighted assets up again? Many thanks.
Thank you. Let me start with share of wallet. I don't believe that this is a fundamentally new concept. I just think that we need to take an integrated view on the different sources of assets. Historically, obviously, given the hiring and the acquisitions that Julius Baer has made, a substantial amount of new client money has come from new relationship managers and the new clients they have brought into the group. Obviously, it's great to attract new clients. We all know the economics of attracting new clients, having to go through a complete client onboarding process, with all the challenges associated to that.
Obviously, increasing share of wallet from that perspective is the easier and more straightforward way, but has other challenges, as it means you have to add value to clients and add that value for a broader fortune so as to attract it. I believe we have to cultivate both activities in an equal way. When it comes to distinctive technology, I believe we are a very technologically distinct firm at the level of the relationship manager, and especially at the level of our advisory processes. I've alluded to DiAS, our Digital Advisory Suite before, which we've developed now over the last three or four years. Originally devised as a piece of regulatory technology that allows us to stay in business under MiFID regulations in European advisory.
It has now morphed into something broader that actually allows relationship managers to better identify client needs and to offer the breadth and depth of client solutions in a complex multi-geographic and regulatory dense environment in the proper way. I think this differentiates us in a time when many banks are actually pulling out of advisory in the European space and moving their clients fully into discretionary. Julius Baer is 100% capable of offering a advisory experience to high net worth individuals. That's the kind of unique capabilities we will continue to drive moving forward.
Your question about the treasury portfolio. I mean, the treasury portfolio is the part of the asset side which you can easily move and quickly. As the credit book was growing, coming from the liquidity ratios, we decided to decrease the treasury portfolio towards the end of the year, which means not reinvest it and divest some parts actually across the board from the low intensity, very high quality bonds to our smaller portfolios on the credit side across the board. No special emphasis. As I said, I mean, this is opportunistic. If you believe the timing is right and the liquidity ratios allow, then of course we will reinvest into the treasury portfolio again.
Let's take the last question on the phone, please.
The last question comes is a follow-up question from Anke Reingen from the Royal Bank of Canada. Please go ahead.
Yeah. Thank you very much for seeing me ask another question. I just wondered about your base case assumption on risk-weighted assets goals, so it allows us to get a bit of more sense for your return on capital and capital target and the potential for active capital management. Then just something in terms of regulation. I guess to 2022, we probably don't have any impact on the risk-weighted assets. Do you have a view about the longer term risk density? Thank you very much.
The intensity, I mean, over the longer term, we always said risk-weighted assets grow with operating income, and the intensity will probably grow a bit. There is also some impact from a new Swiss rule that kicked in actually on the 1st January of this year, which adds about CHF 700 million. These are add-on risks, a FINMA rule, CHF 700 million of risk-weighted assets. Longer term, I would say the intensity probably goes a bit up, but not dramatically.
Thank you.
Any more questions in the room, please?
Yeah.
All right.
Oliver here at Reuters. You mentioned that you wanna focus on ultra and high net worth individuals. Does that mean that you're getting rid of the rest of your clients?
I think the bank has been primarily focused on high net worth and ultra high net worth clients in the past. Obviously, with some exceptions, as they always exist and as potential may not materialize in the future or as the next generation is addressed. The statement is that the bulk of our investments will clearly go into ultra high net worth and high net worth clients in the service and the solutions and in the core markets where we'll serve them. Julius Bär will be best positioned, obviously, to serve those clients moving forward.
Can you indicate how much is this ultra and high net worth as a percentage of assets?
It's a very high percentage. Very high. I mean, more than 90%, definitely.
If there are no more questions, let's conclude today's session. Thank you very much indeed for coming, and very much looking forward to being in touch. Thank you.