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Julius Baer was hit by a 52 per cent fall in annual profits as the Swiss wealth manager announced it was writing off its SFr606mn ($700mn) exposure to the crisis-hit Signa property group.
The Swiss lender also confirmed the departure of chief executive Philipp Rickenbacher, which was reported by the Financial Times and other media outlets on Wednesday. He will be replaced on an interim basis by his deputy and chief operating officer, Nic Dreckmann.
As a result of the biggest crisis to hit the bank in at least five years, Julius Baer reported SFr454mn of profit in 2023 — down from SFr950mn a year earlier — and earnings per share of SFr2.21, down 52 per cent.
“Speaking on behalf of the entire board of directors, I deeply regret that the full loss allowance for the largest exposure in our private debt business has significantly impacted our net profit for 2023,” said chair Romeo Lacher.
The wealth manager is one of the biggest lenders to Signa, a European luxury developer whose assets include a stake in KaDeWe, Germany’s most famous department store, and in the Chrysler Building in New York.
Julius Baer disclosed in November that the largest exposure in its private debt loan book was to one client — reported at the time to be Signa — and said it was taking a SFr70mn provision against potential losses.
It also said it was reviewing its private debt lending business. Since then its shares have dropped 15 per cent.
On Thursday it confirmed that it was exiting the specialist business, winding down its remaining private debt book of SFr800mn — which accounted for 2 per cent of its total loan book — and refocusing on its traditional areas of credit, such as Lombard lending and mortgages.
Despite the Signa loss, Julius Baer still increased its common equity tier one ratio — an indicator of its financial resilience — from 14 per cent to 14.6 per cent over the year and raised its liquidity coverage ratio from 233 per cent to 291 per cent.
Julius Baer said the five members of the executive board who were involved in credit decisions would be stripped of their 2023 bonuses and other members would have their variable pay “substantially reduced”.
Lacher and members of the board’s governance and risk committee will forgo their share-based fees, while Julius Baer also confirmed an FT report that David Nicol, chair of the committee, would not stand for re-election at the bank’s annual meeting in April.
“The board of directors will focus on reinforcing a strong risk culture, in line with our overarching objective to use our solid balance sheet with the utmost prudence for the benefit of our clients,” Lacher added.
