Julius Baer Group, a Swiss wealth manager, has announced that its CEO, Philipp Rickenbacher, will step down following significant losses related to its exposure to Austria’s Signa Group.
Leadership Change and Search for Successor
Rickenbacher’s resignation was confirmed on Thursday, and Nic Dreckmann, the current deputy CEO and chief operating officer, will serve as the interim CEO during the period in which the board conducts an external search for a suitable successor.
Financial Performance Affected by Net Credit Losses
Julius Baer released its full-year 2023 results, revealing substantial net credit losses of 606 million Swiss francs ($703 million). This includes a loan-loss allowance of CHF586 million for a significant private-debt exposure that was disclosed in November of the previous year. While the client was not named, media reports have linked these loans to Austrian property group Signa, which recently filed for insolvency.
Stock Performance and Provisioning for Bad Loans
The announcement comes as the company’s shares continue to struggle, having plummeted by over 20% in November 2023 after Julius Baer confirmed the provision of bad loans. The negative impact on the company’s performance further highlights the financial difficulties it has faced.
Background on Signa Group and its Challenges
Rene Benko, a prominent entrepreneur, formerly steered Signa, which had invested in various holdings, including Manhattan’s Chrysler Building, Swiss department-store chain Globus, and London luxury retailer Selfridges. However, rising debts combined with increased interest rates led to financial problems for Signa. In January of this year, its subsidiary, German retailer chain Galeria Karstadt Kaufhof, also filed for insolvency.
Julius Baer’s exposure to the group consisted of “three loans to different entities within a European conglomerate active in commercial real estate and luxury retail,” according to the company’s statement.
Julius Baer Announces Changes and Results for 2023
In a recent statement, the chairman of Julius Baer, speaking on behalf of the entire board of directors, expressed deep regret regarding the impact of significant loss allowances on the company’s net profit for 2023. This loss allowance stems from the largest exposure in the private-debt business.
As a result of these financial challenges, the CEO, Rickenbacher, and five executives directly involved in credit decisions will not be receiving bonuses for 2023. Additionally, David Nicol, the board’s chair of governance and risk, will not be seeking re-election at the upcoming 2024 annual general meeting.
To refocus its lending activities and leverage its successful long-term track record, Julius Baer has decided to exit its private debt business. Instead, the company will concentrate on its mortgage and credit businesses. As part of this strategic shift, Julius Baer aims to wind down its remaining private debt book, accounting for approximately CHF800 million or 2% of its total loan book.
Despite the challenges faced, Julius Baer achieved a profit of CHF454 million for the full year of 2023, representing a decrease of 52% compared to the previous year. The company also declared a dividend of CHF2.60. Impressively, Julius Baer managed to attract net new money inflows of CHF12.5 billion throughout the year, despite ongoing client deleveraging. This success can be partly attributed to the turmoil in the industry following the collapse of domestic peer Credit Suisse earlier in 2023.