Zurich-based Julius Baer will exit the private debt market and is preparing to write off its CHF606mn ($700mn) exposure to Signa, the now-collapsed luxury developer owned by René Benko whose portfolio included German department store KaDeWe and the Chrysler Building in New York. The private bank’s CEO, Philipp Rickenbacher, has also resigned.
The bank intends to sell its remaining CHF0.8bn in private credit and will refocus on its credit business, which includes Lombard and mortgage lending. The 52% loss — more than half of its profits for the year — amounted to a CHF586m (€629m) hit on its private debt loan book.
Julius Baer was one of Signa’s largest creditors. A profit warning had been issued last November, along with loan provisions of CHF82m being set aside, which detailed the size of the exposure for the first time and tried to allay market fears. The move was unsuccessful as its shares fell 20% and Moody’s Investors Service downgraded its credit rating to negative.
Nic Dreckmann, Julius Baer’s current Deputy CEO and COO, will act as temporary CEO, while the bank searches for a successor to Rickenbacher. David Nicol, Chair of the bank’s governance and risk committee, is also due to stand down at its 2024 annual general meeting. Richard M Campbell-Breeden, a Non Executive Board Member since 2018, has been appointed as Vice-Chair. Rickenbacher and the five members of the executive board responsible for credit decisions will not receive any variable pay for 2023.
Romeo Lacher, Chairman at Julius Baer, said: “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. Our 2023 results reflect our determination to end any uncertainty regarding our private debt business through this full loss allowance.
“We are refocusing our lending activity on more traditional areas, which are an important part of our wealth management offering.”
Julius Baer reported a CHF454m profit for 2023, down 52% year-on-year. The bank attracted CHF12.5bn in net new money over this period, and its AUM grew by CHF3bn (1%) to CHF427bn.