Julius Baer faces US$156 million loan loss charge
[ZURICH] Julius Baer Group said it's booking another large loss from property developments it helped finance, just as the Swiss wealth manager is emerging from a crisis triggered by its exposure to Rene Benko's Signa real estate empire.
The Zurich-based bank disclosed late Tuesday (May 20) that it's taking a loan-loss charge of US$156 million related to its private debt business and selected positions in its mortgage operation.
As part of a review of its credit portfolio, Baer is discussing writing down a loan related to a real estate project in the German city of Hanover that's on the cusp of default and is also facing a loss from another development, Bloomberg reported earlier on Tuesday, citing people familiar with the matter.
The report prompted the company to release an interim management statement ahead of schedule.
That report showed assets under management of 467 billion Swiss francs (S$731.7 billion), a 6 per cent decrease from the end of 2024, according to a statement, as the strong Swiss franc had a currency impact of 28 billion francs. The bank posted net new money of 4.2 billion francs for the same period, coming from clients in Asia and Western Europe, it said.
The bank also said it was on track to achieve the additional 110 million francs in cost savings it announced in February, and that this was expected to start benefiting profitability later this year.
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'We expect investors to react negatively to disappointing net new money,' Citigroup analyst Nicholas Herman wrote in a note to clients, adding that the loan loss is also 'disappointing on several levels.'
'This follows a series of mis-steps prior to the arrival of CEO Stefan Bollinger,' he said, citing the Signa loss, the attempt to acquire Swiss rival EFG, flows and interest margins.
Chief risk officer Oliver Bartholet will retire, the bank added, in another departure from the executive board since loans to defunct property tycoon Rene Benko helped cut 2023 profit in half. Bartholet will hand over his responsibilities on July 1 to Ivan Ivanic, who joined Julius Baer in February as chief credit officer.
The executive board, which was slashed to five from 15 following the arrival of newly appointed chief executive officer Stefan Bollinger, will be expanded to include a chief compliance officer, with an announcement 'in due course.'
Bollinger and chairman Noel Quinn, HSBC Holdings' former CEO, are seeking to clean up the balance sheet and set the firm back on a growth path. The two are expected to present a strategy update in June as they look to shore up investor confidence.
Baer, Switzerland's second-largest listed wealth manager, wrote off US$700 million in loans and shut down its private-debt business after Benko's conglomerate unravelled in late 2023.
The wealth manager said it has made progress on the wind-down of its private-debt loan book, with the remaining notional exposure now well below 0.2 billion Swiss francs, a more than 50 per cent reduction since the end of 2024, it said. The remaining book stands at 0.4 per cent of the total loan book, according to the statement.
Last week, it emerged that Julius Baer has been ordered to hand over 4.4 million Swiss francs because of alleged failings in money-laundering controls. The previously undisclosed 'enforcement proceeding' is separate from an existing Finma probe into the Benko fallout. BLOOMBERG
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