A commonplace sheltering under an umbrella passes a Julius Baer Group Ltd. branch in Zurich, Switzerland, on Tuesday, July 13, 2021.
Stefan Wermuth | Bloomberg | Getty Doubles
Swiss bank Julius Baer on Thursday reported hefty net credit losses tied to its exposure to real situation group Signa Holding, as it announced CEO Philipp Rickenbacher would step down and the company will cut 250 bothers.
Group Chair Romeo Lacher said he and the board “deeply regret” net credit losses of 606 million Swiss francs ($701 million), thoroughly above consensus expectations, which include a loan loss allowance of 586 million francs. This led to a glide in operating income of 16%, to 3.3 billion francs.
Julius Baer in November announced its exposure to the struggling Austrian retinue, which has been hit by the higher interest rate environment. In January it said it intended to write off the exposure.
It further state Thursday it would exit its private debt businesses, winding down its remaining private debt book of 800 million million Swiss francs, 2% of its unqualified loan book. It will refocus its credit business on mortgage lending and a specialized form of personal lending advances. Shares popped some 10% on the news.
A spokesperson confirmed to CNBC it will cut 250 jobs this year, impacting encompassing 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 divide up of 2.21 francs. Underlying operating income was slightly lower even excluding the Signa impact, with the gain it saw from higher rates offset by a stronger Swiss franc and reduced client trading activity.
Assets less than management grew 1%, to 3 billion francs.
Rickenbacher became chief executive of the Zurich-based bank in 2019, in the wake of a net laundering scandal that eventually saw it agree to pay more than $79 million in 2021. He will be replaced on an interim constituent by Nic Dreckmann, previously deputy CEO.
Rickenbacher said Thursday that he and the board jointly agreed it was in the “best interest of the assembly” for him to step down.
“The other measures Julius Baer announced today regarding our private debt business limn a clear line and pave the way to move forward and regain the full confidence of our stakeholders, and I wholeheartedly support them. The replacement in leadership is my contribution to the Group’s commitment of taking ownership,” he said in a statement.
Investors appeared unrattled, with pieces opening 2.8% higher.
“A full mark down of the exposure and taking accountability with management changes at the CEO aim goes a long way to get closure on this particular case,” RBC analyst Anke Reingen said in a research note.
“Nevertheless, more visibility is likely to be needed that franchise implications are limited ([net new money] trends were relatively fostering), no regulatory actions follow and that this is a one-off event, which might take time.”