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Wednesday, May 22, 2024

Julius Baer CEO to Leave After Signa Exposure

In Zurich, Switzerland, a pedestrian takes cover under an umbrella, passing a Julius Baer Group Ltd. branch on a rainy day. The Swiss bank recently announced some significant changes, including the departure of CEO Philipp Rickenbacher and the reduction of 250 jobs. This news comes as the company reported substantial net credit losses related to its exposure to real estate group Signa Holding.

In a statement, Group Chair Romeo Lacher expressed deep regret over the net credit losses amounting to 606 million Swiss francs ($701 million). The losses were well above consensus expectations and led to a 16% decrease in operating income, which now stands at 3.3 billion francs. This situation arose from the struggling Austrian company’s difficulties due to the higher interest rate environment. The bank previously announced its intention to write off the exposure back in January.

Moreover, Julius Baer revealed plans to exit its private debt businesses, winding down its remaining private debt book of 800 million Swiss francs. In the midst of these changes, the company intends to refocus its credit business on mortgage lending and a specialized form of personal lending loans.

As part of an ongoing cost-cutting drive, Julius Baer will be cutting 250 jobs this year, affecting approximately 3% of its 7,425 employees. The bank reported a net profit attributable to shareholders of 454 million Swiss francs for the full year of 2023, a 52% decline from the previous year. Despite the challenges, the bank’s assets under management saw a 1% increase, reaching 3 billion francs.

Rickenbacher, who became chief executive of the Zurich-based bank in 2019, will be stepping down and will be replaced on an interim basis by Nic Dreckmann, previously the deputy CEO. Rickenbacher expressed that his departure was in the best interest of the company, and he expressed support for the measures Julius Baer is taking to move forward and regain the full confidence of stakeholders.

Despite these changes, investors appeared unfazed, with shares opening 2.8% higher. Analysts also provided positive feedback, noting that the management changes and the full mark down of the exposure go a long way in addressing the situation.

As Julius Baer moves forward, the company will need to demonstrate that franchise implications are limited, show positive trends in net new money, avoid regulatory actions, and assure stakeholders that this is a one-time event. These steps will be essential in rebuilding trust and confidence in the bank’s future prospects.

Overall, these changes present a new chapter for Julius Baer, and it will be interesting to see how the bank navigates this evolving landscape.

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