Julius Baer Experiencing Roung Decline of Profits

Julius Baer faced a significant blow with a 52% plunge in annual profits, driven by the decision to write off its SFr606 million ($700 million) exposure to the crisis-ridden Signa property group.

The Swiss wealth manager also confirmed the departure of CEO Philipp Rickenbacher, who will be temporarily succeeded by deputy and COO Nic Dreckmann.

The bank reported a profit of SFr454 million in 2023, down from SFr950 million the previous year, and earnings per share dropped by 52% to SFr2.21.

Julius Baer, a major lender to Signa, a European luxury developer with assets including a stake in Germany’s KaDeWe and the Chrysler Building in New York, disclosed its significant exposure in November, taking an SFr70 million provision against potential losses. Following this, the bank’s shares experienced a 15% decline. In response to the crisis, Julius Baer confirmed its exit from the private debt lending business, winding down the remaining private debt book of SFr800 million, which represented 2% of its total loan book. The focus will shift back to traditional credit areas like Lombard lending and mortgages.

Despite the setback from the Signa loss, Julius Baer managed to increase its common equity tier-one ratio, indicating financial resilience, from 14% to 14.6% throughout the year. The liquidity coverage ratio also saw an improvement, rising from 233% to 291%.

In light of the situation, the executive board members involved in credit decisions will lose their 2023 bonuses, and other members will see a substantial reduction in variable pay. Chair Romeo Lacher and members of the governance and risk committee will waive their share-based fees.

Additionally, David Nicol, chair of the committee, will not seek re-election at the bank’s annual meeting in April. Lacher emphasized the board’s focus on reinforcing a strong risk culture and utilizing the solid balance sheet prudently for the benefit of clients.

Chair Romeo Lacher expressed regret over the impact of the loss allowance for the largest exposure on the net profit in their private debt business.

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