Julius Baer is nearing the end of its clean-up process related to its significant exposure to Rene Benko’s collapsed Signa real estate empire. The bank had written off the entire $700 million in loans to Signa companies, a situation that led to the resignation of CEO Philipp Rickenbacher in February 2024. The firm's shares saw a sharp increase following the announcement of Rickenbacher's departure, trading up 7.3%.
The ongoing issues included scrutiny from the Swiss regulator Finma, which opened an enforcement procedure against Julius Baer concerning control failures and inadequate risk management practices exposed by the Signa debacle. Specifically, Finma was investigating concerns about insufficient separation of business and control functions and how loans for private clients like Benko were structured and overseen. Julius Baer had initially set aside a modest 70 million Swiss francs ($81.3 million) for potential losses against Signa loans in November 2023, but the situation rapidly worsened, necessitating a full write-off.
New CEO Stefan Bollinger, who took over on an interim basis after Rickenbacher's exit and was later confirmed, has been tasked with charting a new strategic direction. The bank plans to exit its private debt business altogether as part of this restructuring. The anticipated resolution of the Benko saga is expected to allow Julius Baer to loosen its self-imposed ban on certain complex private debt transactions for its clients, signaling a return to more normalized business operations in this area after the significant financial and reputational damage incurred.
This move comes after the bank faced a significant drop in its share price, falling as much as 14.6% when Finma's enforcement proceedings were announced. The new strategic moves under Bollinger, including the exit from private debt and the expected loosening of client transaction bans, are aimed at restoring investor confidence and strengthening the bank's risk control framework going forward.
