Embattled asset manager GAM warns on profit, cuts staff, dividend

By Michael Shields and Simon Jessop

ZURICH/LONDON (Reuters) - GAM Holding AG said it would cut 10 percent of its staff and ditch its dividend as it warned it would slide to a net loss this year, sending shares in the Swiss asset manager down 30 percent.

GAM has had a torrid year after being forced to write down the value of its $217 million acquisition of UK hedge fund Cantab and close several funds after a top money manager was suspended for alleged breaches of its rules.

The company said on Thursday it expected a 2018 net loss of around 925 million Swiss francs ($931 million) as assets under management had fallen by a further 4.8 percent since the end of the third quarter.

 

It expected 2019 financial results to be materially below this year's, it said, referring to underlying pretax profit.

Assets totalled 139.1 billion Swiss francs at the end of November, down from 146.1 billion at the end of September, mainly driven by net outflows of 4.2 billion in Investment Management, it said in a statement.

Baader Helvea analyst Tomasz Grzelak said the full-year net loss forecast was around 10 percent below consensus expectations, the dividend cut was "really negative" and planned cost savings of 40 million francs did not go far enough.

"I'm not optimistic... You don't really know when the asset base is going to stabilise, that's the issue," he said.

GAM shares had plunged by around 30 percent at 0910 GMT, taking the year-to-date decline to 70 percent.

GAM, which has more than 900 employees, said its expected 2018 net loss under IFRS accounting standards reflected a goodwill impairment charge of around 885 million francs, an impairment charge of around 62 million francs related to Cantab and a one-off charge of around 30 million linked to a revamp of its absolute return/unconstrained fixed income (ABRF) strategy.

It forecast its underlying profit before tax for 2018 would fall to around 125 million francs from 172.5 million in 2017.

GAM had a 2017 IFRS net profit of 123.2 million francs.

GAM said it expected to pay no dividend for 2018. It revised its dividend policy for 2019 and beyond to target a minimum payout of half of underlying net profits.

GAM assets suffered a 17.7 billion franc hit in the third quarter due to slumping markets.

Amid its missteps, GAM under new Chief Executive David Jacob has become a potential prey, with media reporting it rebuffed an offer from Schroders for its hedge fund unit.

On a call with reporters, Jacob reiterated that GAM's board was open to all options but management was focused on running the business as is.

($1 = 0.9932 Swiss francs)

(Reporting by Michael Shields; Editing by Sunil Nair and Adrian Croft)