Julius Baer, a Swiss bank based in Zurich, has announced the resignation of its CEO and its decision to exit the private debt business. This comes as the bank faces significant challenges, including exposure to the bankruptcy of Austrian asset manager Signa.
During a presentation on the bank's 2023 results, Chairman Romeo Lacher expressed regret and acknowledged that management had not been a good steward of the firm. However, he emphasized that the troubles were primarily linked to a single credit event and that other parts of the company were performing well.
As a result of its decision to exit the private debt business, Julius Baer reported net credit losses of 606 million Swiss francs (approximately $702 million) in its annual results. About 586 million francs of these losses were attributed to a loan-loss allowance for unspecified private debt exposure.
In a statement, CEO Philipp Rickenbacher acknowledged that stepping down was in the best interest of the company. He highlighted that the measures taken regarding the private debt business would pave the way for Julius Baer to regain the full confidence of its stakeholders.
Deputy CEO and Chief Operating Officer Nic Dreckmann will assume the role of interim CEO until a permanent successor is found.
Following this news, shares of Julius Baer experienced a nearly 6% increase to 50.02 Swiss francs in midmorning trading on the SIX Swiss Exchange.
While Julius Baer did not explicitly mention the connection to Signa, media reports have suggested that the bank's troubles are tied to the bankruptcy of the Austrian firm. In November, Julius Baer announced its exposure to private debt issues, including three loans to entities within a European conglomerate involved in commercial real estate and luxury retail.
Signa Development faced ratings downgrades and filed for insolvency proceedings in Vienna in December. Switzerland's financial markets regulator is reportedly examining the situation surrounding Signa.
Julius Baer's challenges arise at a time when the bank has seen some benefits from the fallout at its onetime competitor Credit Suisse. The unravelling of Credit Suisse led to a government-orchestrated takeover by rival UBS last year, aiming to avert a potential global banking crisis.
These recent developments indicate that Julius Baer faces an uphill battle to recover and regain the trust of its stakeholders. The resignation of the CEO and the bank's exit from the private debt business reflect the necessary steps to address the challenges and chart a new course for the future. Finding a permanent successor to lead the bank will be a crucial task as it moves forward.
