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Investing.com -- Julius Baer ’s (SIX:BAER)recovery is expected to take longer than previously assumed, according to RBC Capital Markets, before potential upside by 2028 as the Swiss wealth manager restructures its business.
The broker cut its price target on the stock to CHF60 from CHF63, still representing about 14% upside from current levels.
RBC analysts said Julius Baer’s updated strategy involves “more adjustments needed than we had anticipated,” implying slower earnings per share (EPS) recovery.
Key changes include tighter risk controls, management reshuffles, and a review of the loan book, which resulted in CHF130 million in provisions earlier this year. “This means that the EPS recovery will take longer than we had thought,” the analysts led by Anke Reingen noted.
The strategic plan targets a cost/income ratio below 67% by 2028, net new money growth of 4-5%, and a RoCET1 above 30%.
Cost savings, amounting to CHF260 million or 9% of 2024 costs, and investments in growth are expected to gradually improve operating leverage.
Meanwhile, gross margin (GM) assumptions remain cautious. Julius Baer models a 2028 gross margin of 80 basis points, with recurring margins between 37-39bps.
RBC projects a slightly lower activity-driven margin compared to historical levels. The analysts highlighted that “a 5bp higher GM would add 12% to 2028E profit before tax (PBT).”
Buybacks are not expected in the near term, with the bank focused on risk and cost management. However, RBC expects buybacks to resume in 2026, noting Julius Baer reaffirmed its 14% CET1 capital threshold for returning capital.
“We continue to expect buybacks will resume in 2026 but timing could be different,” it wrote.
RBC continues to rate the stock Outperform.
“The shares do not screen attractive on our 2026 and 2027 estimates but giving credit for delivery on conservative 2028 targets our PT of CHF60 represents upside with the potential for additional upside from more supportive markets/FX effects,” the anaysts wrote.
They added that successful execution could also help normalize the current elevated cost of equity (COE), which stands 1.4 percentage points above the historical average.