Julius Baer, the Swiss bank, has announced that its CEO, Philipp Rickenbacher, will be stepping down from his position. This decision comes as a result of taking responsibility for substantial losses suffered by the firm due to its exposure to Signa Holding, Austria's largest privately owned real estate company. Signa Holding filed for bankruptcy in November 2023.
Rickenbacher stated that he made the choice to leave in order to restore stakeholders' confidence in Julius Baer. Additionally, the bank has revealed plans to completely exit the private debt business due to the significant losses incurred through loans provided to Signa Holding.
Following this announcement, the share price of Julius Baer increased by 7% on Thursday. It should be noted that the bank's shares experienced a 22% decline in November, reflecting concerns about its connection to Signa via private credit loans.
As a consequence of these losses, the five members of Julius Baer's board who were involved in the private credit business will not receive their 2023 bonuses. Furthermore, David Nicol, the chair of the risk and governance committee, will step down once his term ends.
According to Julius Baer, it suffered a loss of CHF 586 million ($678 million) in loans to its primary private debt client, Signa Holding. Signa Holding was forced into bankruptcy proceedings after failing to secure additional funding needed to pay off its €5 billion ($5.4 billion) debt.
The departure of the CEO and the bank's decision to exit the private debt business underline Julius Baer's commitment to addressing the significant losses it has faced and reassuring its stakeholders.
Bank's Private Credit Losses Lead to Drop in Profits
The bank's private credit losses have resulted in a significant decrease in its net profits, with a year-on-year decline of 52% to CHF454 million. As a response to the losses it experienced from Signa, it has decided to commence an orderly winding up of its CHF800 million private credit book.
Scrutiny on Signa
Julius Baer's loans to Signa had previously attracted the attention of Switzerland's financial sector watchdog, Finma. The watchdog expressed concerns about the Austrian property company, which holds stakes in prestigious properties such as the Chrysler Building, London's Selfridges, and Berlin's KaDeWe luxury department store.
Troubles for Signa
Signa, established by Austrian property magnate René Benko in 2000, began facing difficulties in 2023. The European Central Bank's sudden interest rate hikes triggered a downturn in Germany's property market, adversely affecting Signa's operations.
In 2019, Rickenbacher assumed the role of CEO, succeeding former chief executive Boris Collardi, who had left two years prior to join Julius Baer's primary Swiss competitor, Pictet Group. Rickenbacher, who had spent more than a decade working for Julius Baer before his appointment as CEO, will now be succeeded by company veteran Nic Dreckmann. Dreckmann will serve as interim CEO until a permanent replacement is found.
To address the challenging financial situation, the bank has taken measures to reduce compensation for board members. Those who have not had their bonuses revoked will still experience substantially reduced compensation, which will be entirely share-based and deferred.