Julius Baer hit by Signa exposure, announces CEO exit and job cuts

Swiss bank Julius Baer on Thursday reported hefty net credit losses tied to its exposure to real estate group Signa Holding, as it announced CEO Philipp Rickenbacher would step down and the company will cut 250 jobs.

Group Chair Romeo Lacher said he and the board “deeply regret” net credit losses of 606 million Swiss francs ($701 million), well above consensus expectations, which include a loan loss allowance of 586 million francs. This led to a slide in operating income of 16%, to 3.3 billion francs.

Julius Baer in November announced its exposure to the struggling Austrian company, which has been hit by the higher interest rate environment. In January it said it intended to write off the exposure.

It further said Thursday it would exit its private debt businesses, winding down its remaining private debt book of 800 million million Swiss francs, 2% of its total loan book. It will refocus its credit business on mortgage lending and a specialized form of personal lending loans. Shares popped some 10% on the news.

A spokesperson confirmed to CNBC it will cut 250 jobs this year, impacting around 3% of its 7,425 employees as part of an ongoing cost-cutting drive.

The bank reported net profit attributable to shareholders of 454 million Swiss francs for the full-year 2023, down 52%, with earnings per share of 2.21 francs. Underlying operating income was slightly lower even excluding the Signa impact, with the benefit it saw from higher rates offset by a stronger Swiss franc and reduced client trading activity.

Assets under management grew 1%, to 3 billion francs.

Rickenbacher became chief executive of the Zurich-based bank in 2019, in the wake of a money laundering scandal that eventually saw it agree to pay more than $79 million in 2021. He will be replaced on an interim basis by Nic Dreckmann, previously deputy CEO.

Rickenbacher said Thursday that he and the board jointly agreed it was in the “best interest of the company” for him to step down.

“The other measures Julius Baer announced today regarding our private debt business draw a clear line and pave the way to move forward and regain the full confidence of our stakeholders, and I wholeheartedly support them. The change in leadership is my contribution to the Group’s commitment of taking ownership,” he said in a statement.

Investors appeared unrattled, with shares opening 2.8% higher.

“A full mark down of the exposure and taking accountability with management changes at the CEO level goes a long way to get closure on this particular case,” RBC analyst Anke Reingen said in a research note.

“However, more visibility is likely to be needed that franchise implications are limited ([net new money] trends were relatively encouraging), no regulatory actions follow and that this is a one-off event, which might take time.”