February 28, 2018 / 7:28 AM / in a year

UPDATE 1-EFG International outflows continue, posts 2017 loss

(Adds detail, share price, analyst comment)

By John Revill

ZURICH, Feb 28 (Reuters) - EFG International on Wednesday reported a worse-than-expected 2017 net loss as customer outflows continued and it absorbed integration costs from its takeover of rival Swiss private bank BSI.

Its net loss of 59.8 million Swiss francs ($63.6 million) was far worse than the 4.7 million franc loss expected on average by analysts polled by Reuters as net new money remained negative.

The Zurich-based bank reported outflows of 5.8 billion francs, a worsening from the 5.4 billion francs leaving the bank during 2016 following its purchase of BSI.

It kept its dividend unchanged at 0.25 francs per share.

Its shares were 1.9 percent lower in premarket indications.

EFG agreed to BSI from Brazil’s BTG Pactual in February 2016 to nearly double in size so it could compete better in Switzerland’s crowded private banking market.

But Lugano-based BSI has been mired in legal problems, chiefly related to transactions linked to the scandal-hit Malaysian sovereign fund 1MDB, which resulted in the closure of BSI’s Singapore branch in 2016.

Following billions of dollars of client withdrawals in 2016, wealthy EFG customers withdrew 8.2 billion francs from the bank in 2017, although the effect decelerated during the year, EFG said.

Excluding the exit of former BSI clients, net new money turned positive to 2.3 billion francs from an outflow of 2 billion francs in 2016, it added.

The bank, whose largest shareholder is Greece’s Latsis family, had revenue-generating assets under management of 142 billion francs, down from 144.5 billion francs at the end of 2016.

Chief Executive Giorgio Pradelli described 2017 as a “transformational” year for the bank, with the BSI integration completed and cost savings of 108 million francs more than double the target.

Analysts highlighted the cost savings, although underlying net new money was weaker than expected.

Tomasz Grzelak, an analyst at Baader Helvea, estimated the bank had net outflows of 200 million francs in the last two months of 2017.

“In our view, this shows that it is too early to claim that EFG is well back on an underlying net new assets growth path,” he said.

EFG shares took a hit last month when a Taiwanese court ordered the bank to return more than $193.8 million related to a disputed loan.

On Wednesday EFG said it disagreed with the tribunal’s decision and was challenging the validity of the award.

$1 = 0.9398 Swiss francs Reporting by John Revill

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